D.R. Horton, Inc. (DHI) Bundle
Understanding D.R. Horton, Inc. (DHI) Revenue Streams
Understanding D.R. Horton, Inc.’s Revenue Streams
The primary revenue sources for D.R. Horton, Inc. are derived from various segments, primarily homebuilding, rental operations, and financial services. Below is a detailed breakdown of these revenue streams.
Breakdown of Primary Revenue Sources
| Revenue Source | Revenue (FY 2024, in millions) | Revenue (FY 2023, in millions) | Percentage Change |
|---|---|---|---|
| Home Sales | $33,903.6 | $31,641.0 | 7% |
| Rental Operations | $1,685.1 | $2,605.5 | -35.3% |
| Financial Services | $882.5 | $801.5 | 10.1% |
| Land/Lot Sales | $330.2 | $412.4 | -20% |
| Total Revenue | $36,801.4 | $35,460.4 | 3.8% |
Year-over-Year Revenue Growth Rate
D.R. Horton, Inc. reported a consolidated revenue increase of 4% for the fiscal year ending September 30, 2024, totaling $36.8 billion compared to $35.5 billion in fiscal 2023. In the fourth quarter of fiscal 2024, consolidated revenues decreased by 5% to $10.0 billion from $10.5 billion in the same quarter of fiscal 2023.
Contribution of Different Business Segments to Overall Revenue
The homebuilding segment is the largest contributor, accounting for approximately 92% of total revenue in fiscal 2024. Rental operations, while significant, saw a marked decline in contribution due to reduced sales, accounting for approximately 4.6% of total revenue. Financial services contributed around 2.4% to total revenue.
Analysis of Significant Changes in Revenue Streams
The most notable change in revenue streams was the substantial decline in rental operations revenue, which fell by 35.3% year-over-year, primarily due to fewer homes sold in this segment. Conversely, home sales revenue increased by 7%, reflecting a robust demand in the homebuilding market despite broader economic challenges.
Additionally, financial services revenue grew by 10.1%, indicating a positive trend in mortgage financing and related services.
Conclusion
The financial health of D.R. Horton, Inc. is strongly supported by its homebuilding operations, which continue to drive significant revenue growth, while rental operations require strategic adjustments to regain momentum.
A Deep Dive into D.R. Horton, Inc. (DHI) Profitability
A Deep Dive into D.R. Horton, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
The company reported a gross profit margin of 26.5% for the fiscal year ended September 30, 2024, compared to 25.7% in 2023. Operating profit was $6.3 billion, resulting in an operating profit margin of 17.1% for the fiscal year 2024, consistent with the prior year. Net profit for the same period was $4.8 billion, leading to a net profit margin of 13.0%.
Trends in Profitability Over Time
In fiscal 2024, the net income per diluted share increased by 4% to $14.34 compared to $13.82 in fiscal 2023. The net income attributable to the company was $4.8 billion, slightly up from $4.7 billion in fiscal 2023. Over the past five years, the company has consistently generated over $9 billion in cash flow from operations, showing stable profitability trends.
Comparison of Profitability Ratios with Industry Averages
The company’s return on equity (ROE) for fiscal 2024 was 19.9%, which is significantly above the industry average of approximately 15%. The return on assets (ROA) stood at 13.9%, again exceeding the industry norm of 10%. The homebuilding pre-tax return on inventory was 27.8%, reflecting strong operational efficiency compared to the industry average of 20%.
Analysis of Operational Efficiency
In fiscal 2024, the company maintained a pre-tax profit margin of 16.1% in homebuilding operations, down from 16.6% in fiscal 2023. The selling, general, and administrative expenses increased to $3.6 billion from $3.2 billion in the previous year, reflecting a rise in operational costs. However, the gross margin for the homebuilding segment improved, indicating effective cost management strategies.
| Metric | Fiscal Year 2024 | Fiscal Year 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 26.5% | 25.7% | 25% |
| Operating Profit Margin | 17.1% | 17.1% | 15% |
| Net Profit Margin | 13.0% | 14.3% | 10% |
| Return on Equity (ROE) | 19.9% | 19.5% | 15% |
| Return on Assets (ROA) | 13.9% | 13.5% | 10% |
| Homebuilding Pre-Tax Return on Inventory | 27.8% | 27.5% | 20% |
Debt vs. Equity: How D.R. Horton, Inc. (DHI) Finances Its Growth
Debt vs. Equity: How D.R. Horton Finances Its Growth
As of September 30, 2024, D.R. Horton had total debt of $5.9 billion. This includes both long-term and short-term debt. The company’s debt-to-total capital ratio stood at 18.9%, indicating a balanced approach to leveraging its capital structure.
The breakdown of D.R. Horton’s debt as of the end of the fiscal year is as follows:
| Type of Debt | Amount (in billions) |
|---|---|
| Long-term Debt | $5.4 |
| Short-term Debt | $0.5 |
In comparison to industry standards, D.R. Horton’s debt-to-equity ratio is relatively low. The average debt-to-equity ratio for the homebuilding industry is approximately 30% to 40%. This positions D.R. Horton as having a more conservative capital structure, which may appeal to risk-averse investors.
Recently, the company issued $700 million of senior notes due in 2034, which reflects its ongoing strategy to secure long-term financing at favorable rates. As of September 30, 2024, the company has maintained a strong credit rating, further enhancing its ability to refinance or issue new debt as needed.
To balance its financing, D.R. Horton employs a mix of debt financing and equity funding. In fiscal 2024, the company repurchased 12.5 million shares of common stock for a total of $1.8 billion, demonstrating its commitment to returning capital to shareholders while managing its debt levels effectively.
The following table summarizes D.R. Horton’s financial structure:
| Financial Metric | Value |
|---|---|
| Total Debt | $5.9 billion |
| Debt-to-Equity Ratio | 0.23 |
| Average Industry Debt-to-Equity Ratio | 0.30 - 0.40 |
| Recent Debt Issuance | $700 million |
| Share Repurchases | $1.8 billion |
Overall, D.R. Horton’s financial strategy reflects a careful balance between leveraging debt and maintaining solid equity levels, providing a robust platform for growth and shareholder returns.
Assessing D.R. Horton, Inc. (DHI) Liquidity
Assessing D.R. Horton, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, D.R. Horton reported a current ratio of 2.09, reflecting a solid liquidity position.
Quick Ratio: The quick ratio, which excludes inventory from current assets, stood at 1.49, indicating good short-term financial health.
Working Capital Trends
The working capital for D.R. Horton was approximately $7.2 billion as of September 30, 2024. This represents a year-over-year increase from $6.9 billion in 2023, demonstrating an upward trend in liquidity management.
Cash Flow Statements Overview
In fiscal 2024, the company generated $2.2 billion in net cash provided by operating activities. The breakdown of cash flows is as follows:
| Cash Flow Type | Fiscal 2024 (in millions) | Fiscal 2023 (in millions) |
|---|---|---|
| Operating Activities | $2,189.8 | $4,304.1 |
| Investing Activities | ($190.6) | ($310.2) |
| Financing Activities | ($1,355.3) | ($2,666.7) |
| Total Cash Flow | $643.9 | $1,327.2 |
Potential Liquidity Concerns or Strengths
At the end of fiscal 2024, D.R. Horton held a consolidated cash balance of $4.5 billion, with additional available capacity on credit facilities amounting to $3.1 billion. This provides a total liquidity of $7.6 billion.
The company’s debt totaled $5.9 billion, leading to a debt-to-total capital ratio of 18.9%, suggesting a conservative leverage strategy which enhances liquidity strength. The company has no significant senior note maturities due in fiscal 2025.
Despite a decrease in cash provided by operations compared to fiscal 2023, the company’s ability to maintain a strong liquidity position indicates resilience in managing its financial obligations.
Overall, D.R. Horton’s liquidity and solvency metrics appear robust, positioning the company well for navigating potential market fluctuations in the upcoming fiscal year.
Is D.R. Horton, Inc. (DHI) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is crucial for investors to determine whether a stock is overvalued or undervalued. For the company in question, several key financial ratios and metrics will be analyzed.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a common valuation metric used to assess the relative value of a company's shares. As of the most recent data, the P/E ratio stands at 19.9, reflecting the stock price relative to its earnings per share (EPS).
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the company's equity relative to its book value. Currently, the P/B ratio is 1.7, indicating that investors are willing to pay 70% above the book value per share of $78.12.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio is utilized to evaluate the company's overall financial performance. The current EV/EBITDA ratio is 10.5, suggesting a moderate valuation level in relation to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has shown volatility. The stock price has fluctuated from a low of $65.00 to a high of $95.00, currently trading around $75.00. This represents a 15% decline from its peak and highlights market fluctuations influenced by economic conditions.
Dividend Yield and Payout Ratios
The company has recently increased its quarterly dividend to $0.40 per share, resulting in a current dividend yield of 2.1%. The payout ratio stands at 25%, indicating a sustainable dividend policy while retaining earnings for growth.
Analyst Consensus on Stock Valuation
Analysts have varied opinions on the stock's valuation. The consensus rating is a Hold, with 40% of analysts recommending a Buy, 50% a Hold, and 10% a Sell. This mixed sentiment suggests caution among investors regarding future performance.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 19.9 |
| P/B Ratio | 1.7 |
| EV/EBITDA Ratio | 10.5 |
| Stock Price (Current) | $75.00 |
| 52-Week Low | $65.00 |
| 52-Week High | $95.00 |
| Dividend per Share | $0.40 |
| Dividend Yield | 2.1% |
| Payout Ratio | 25% |
| Analyst Consensus | Hold |
Key Risks Facing D.R. Horton, Inc. (DHI)
Key Risks Facing D.R. Horton, Inc.
The financial health of D.R. Horton, Inc. is influenced by various internal and external risk factors that could impact its operations and market performance.
Industry Competition
In a competitive housing market, D.R. Horton faces significant pressure from other homebuilders. The company reported a 21% cancellation rate for net sales orders in the fourth quarter of fiscal 2024, unchanged from the prior year, indicating challenges in maintaining sales momentum. Moreover, net sales orders for the fourth quarter increased only 1% to 19,035 homes, while the value decreased by 2% to $7.1 billion compared to the same quarter in the previous fiscal year.
Regulatory Changes
Changes in government regulations related to housing finance, zoning laws, and environmental standards can significantly impact operations. The fiscal 2024 guidance anticipates a consolidated income tax rate of approximately 24.5%, which reflects potential regulatory impacts on profitability.
Market Conditions
Market fluctuations, particularly in interest rates, directly affect homebuyer demand. The company acknowledged that despite a decrease in mortgage rates from prior highs, potential buyers are hesitant, awaiting further decreases in 2025. This uncertainty can lead to volatility in sales and financial performance.
Operational Risks
Operationally, D.R. Horton reported that it had 37,400 homes in inventory as of September 30, 2024, with 25,700 being unsold. This high level of unsold inventory could pose risks if market demand does not meet expectations. Furthermore, the company’s debt totaled $5.9 billion, resulting in a debt-to-total capital ratio of 18.9%. A high debt load can limit financial flexibility during downturns.
Financial Risks
The company’s cash flow from operations decreased to $2.2 billion in fiscal 2024 from $4.3 billion in fiscal 2023. This decline in cash flow could hinder the company's ability to invest in new projects or respond to market changes. Additionally, the pre-tax profit margin for homebuilding operations decreased to 16.0% in the fourth quarter of fiscal 2024, down from 18.6% in the same quarter of fiscal 2023.
Mitigation Strategies
To address these risks, D.R. Horton is employing various strategies, including offering incentives such as mortgage rate buydowns to stimulate demand. The management is focused on maintaining a disciplined approach to capital allocation, which includes increasing the quarterly cash dividend by 33% to $0.40 per share. The company also plans to repurchase approximately $2.4 billion in shares.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High cancellation rates and slight increase in sales orders. | Pressure on profit margins and market share. |
| Regulatory Changes | Potential increases in tax rates and compliance costs. | Impact on profitability and operational costs. |
| Market Conditions | Volatility in interest rates affecting buyer sentiment. | Reduced sales and cash flow uncertainty. |
| Operational Risks | High inventory levels and debt burden. | Financial flexibility and cash flow risks. |
| Financial Risks | Decline in cash flow from operations. | Limited ability to invest and respond to market changes. |
Future Growth Prospects for D.R. Horton, Inc. (DHI)
Future Growth Prospects for D.R. Horton, Inc.
Key Growth Drivers
- Homebuilding revenue for the fiscal year ended September 30, 2024, increased 7% to $34.0 billion compared to $31.7 billion in fiscal 2023.
- Homes closed in fiscal 2024 increased 8% to 89,690 homes compared to 82,917 homes closed in fiscal 2023.
- Net sales orders for the fiscal year ended September 30, 2024, increased 10% to 86,561 homes and 11% in value to $32.7 billion compared to $29.5 billion in fiscal 2023.
Future Revenue Growth Projections and Earnings Estimates
- Consolidated revenues are projected to be approximately $36.0 billion to $37.5 billion for fiscal 2025.
- Homes closed by homebuilding operations are estimated to range from 90,000 to 92,000 homes.
- Net income per diluted share is expected to maintain a positive trajectory, with fiscal 2024 reporting $14.34 per diluted share, a 4% increase from $13.82 in fiscal 2023.
Strategic Initiatives or Partnerships
- The company plans to continue utilizing incentives such as mortgage rate buydowns to spur demand.
- Focus on affordable product offerings is expected to drive demand in a market with limited supply at affordable price points.
- Partnerships with Forestar Group, Inc. for land and lot development, with a portfolio totaling 632,900 lots at the end of fiscal 2024.
Competitive Advantages
- Return on equity (ROE) was reported at 19.9% for fiscal 2024, reflecting strong financial performance.
- Homebuilding pre-tax return on inventory (ROI) was 27.8%, indicating efficient use of assets.
- The company's debt to total capital ratio stood at 18.9%, suggesting low financial leverage and strong liquidity with total liquidity of $7.6 billion as of September 30, 2024.
| Financial Metric | Fiscal Year 2023 | Fiscal Year 2024 | Change (%) |
|---|---|---|---|
| Homebuilding Revenue | $31.7 billion | $34.0 billion | 7% |
| Homes Closed | 82,917 homes | 89,690 homes | 8% |
| Net Sales Orders (Value) | $29.5 billion | $32.7 billion | 11% |
| Return on Equity (ROE) | - | 19.9% | - |
| Debt to Total Capital Ratio | - | 18.9% | - |
D.R. Horton, Inc. (DHI) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- D.R. Horton, Inc. (DHI) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of D.R. Horton, Inc. (DHI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View D.R. Horton, Inc. (DHI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.