D.R. Horton (DHI) Stock Forecast & Price Target

D.R. Horton is on track to meet or exceed its fiscal 3Q guidance with consolidated revenues in the range of $8.8-$9.3 billion, a home sales gross margin of 19.7%-20.2%, and a consolidated pretax margin of 12.2%-12.7%. Despite a 4% increase in lot costs, the company's stick and brick cost savings are expected to help improve margins in the back half of the year. The rental business is facing political obstacles and could be eliminated, but it's a relatively small portion of D.R. Horton's overall business. On a positive note, the company beat earnings expectations in its FY2Q with a 13% increase in EPS despite a 2% decline in home sales revenue and a decline in gross margin. With operations in 121 markets and a focus on first-time home buyers, D.R. Horton is well positioned for future growth and also has measures in place to address sustainability concerns. However, in a downside scenario, the company could see a decline in earnings and a lower valuation of $99/share.

D.R. Horton is well-positioned in the homebuilding market with its majority ownership of Forestar Group, traditional land option model, and attractive cash generating properties, but given current macro headwinds and our doubts around group fundamentals, we maintain a Hold rating and cannot justify a substantial uptick in valuation. The company has slightly lowered its top end of FY26 guidance range, but all other areas of the 2026 guide remain unchanged, including cash flow from operations of $3.0 billion, and the F2Q'26 beat on both orders and GM% provides support. Key factors going forward will be the F3Q guide, real-time demand and inventory trends, GM% trajectory in 2H, and updates on the rental business, materials/land costs, and capital allocation.