DHI

A luxury builder in a soft market has bought back enough stock to outrun three years of shrinking profits, and the question is what happens when land competes for the same cash. Toll Brothers (TOL) has gained 7.7% over the past year but slipped over the last six months, and it trades about 10% below its 52-week high, a quiet year for a builder whose management described the sales environment in August as subdued. Over the last three years, earnings per share rose while net income fell, and what closed that gap was not the business but the share count. Toll Has Bought Itself Back Faster Than Profits Fell Averaged over those three years, net income has fallen 2.8% a year while earnings per share have risen 2.3% a year. Nothing operational explains the difference; it is arithmetic. The company has retired about 5.1% of its shares a year on average across that stretch, and 4.8% in the past twelve months alone, so each remaining owner's claim on a smaller profit pool grew anyway. With the dividend added, the whole payout is a 5.3% shareholder yield, once stock compensation is netted out. A Million-Dollar Buyer, And Upgrades Across The Board That yield is funded by a narrow, wealthy slice of the housing market. The luxury move-up business, where the average home sells for about $1.35 million, was roughly 61% of home sales revenue in fiscal Q3 2026 and carries the highest margin of the company's buyer segments. The spending does not stop at signing: across Toll's buyers as a whole, upgrades, structural options and lot premiums averaged $207,000 a home in the quarter, and management says design studio work of that sort is highly accretive to margin. Pricing holds best where it matters most: the more expensive the home, the smaller the incentive as a share of its price. Growth Gets The Cash Before Shareholders Do Free cash flow covers the buybacks and dividends about 1.6 times over, but the payout is not what that cash is aimed at first. Management puts growth first in the capital-allocation order and funds repurchases out of the operating cash flow that is left, and growth here means land: roughly $452 million spent on land acquisition in fiscal Q3 2026, against $2.65 billion of home sales revenue in that quarter. So far that cash flow has covered both, and the fiscal 2026 repurchase plan was raised to $700 million from $650 million. Net debt runs at about 1.1 times EBITDA, a moderate load rather than a stretched one. Balance sheets of that kind are a standing feature of the Trefis High Quality Portfolio's holdings. Cheap Against Earnings That Still Move With The Cycle At 10.9 times trailing earnings, the market is not asking much for the engine. That is a case for patience rather than a promise. Over three years the stock returned 96% in price, though it was up 119% at its peak and has handed some of that back, and buybacks were only one contributor alongside a moving multiple. The engine is real and funded; the profits it works on have shrunk over the last three years, and management, four years into a difficult housing market, is not yet calling a bottom. Whether the retirement pace survives a leaner year is the open question, and the dividend and buyback record is where the answer shows up first. A Cheap Compounder Is Still One Cyclical Bet An engine that quietly retires stock is worth owning, but it sits inside one industry and one housing cycle. Investors who want that compounding spread across many businesses rather than one builder can start with the Trefis High Quality Portfolio. That portfolio has a track record of outpacing the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000.

As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at home builders stocks, starting with D.R. Horton (NYSE:DHI). Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials. The 10 home builders stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 0.6%. In light of this news, share prices of the companies have held steady as they are up 2.5% on average since the latest earnings results. One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE:DHI) builds a variety of new construction homes across multiple markets. D.R. Horton reported revenues of $9.23 billion, flat year on year. This print was in line with analysts’ expectations, but overall, it was a slower quarter for the company with full-year revenue guidance missing analysts’ expectations significantly. David Auld, Executive Chairman, said: “The D.R. Horton team delivered a solid third quarter, highlighted by earnings per diluted share of $3.20, consolidated pre-tax income of $1.2 billion, revenues of $9.2 billion and a pre-tax profit margin of 13.3%." Interestingly, the stock is up 2.9% since reporting and currently trades at $148.98. Read our full report on D.R. Horton here, it’s free. Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction. Installed Building Products reported revenues of $777.8 million, up 2.3% year on year, outperforming analysts’ expectations by 4.4%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA and EPS estimates. Installed Building Products delivered the biggest analyst estimate beat of the whole group. The market seems content with the results as the stock is up 1.4% since reporting. It currently trades at $244.81. Is now the time to buy Installed Building Products? Access our full analysis of the earnings results here, it’s free. Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States. NVR reported revenues of $2.33 billion, down 10.5% year on year, falling short of analysts’ expectations by 3.9%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates. NVR delivered the weakest performance against analyst estimates in the group. The stock is flat since the results and currently trades at $6,400. Read our full analysis of NVR’s results here. Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States. Toll Brothers reported revenues of $2.66 billion, down 9.7% year on year. This print topped analysts’ expectations by 1.6%. Overall, it was a strong quarter as it also put up a beat of analysts’ EPS estimates. The stock is up 3.2% since reporting and currently trades at $147.49. Read our full, actionable report on Toll Brothers here, it’s free. Having delivered over 850,000 homes since its founding in 1950, PulteGroup (NYSE:PHM) is one of America's largest homebuilders, constructing single-family homes, townhouses, and condominiums for first-time, move-up, and active adult buyers across 46 markets in 25 states. PulteGroup reported revenues of $3.98 billion, down 9.6% year on year. This result surpassed analysts’ expectations by 1.1%. It was a strong quarter as it also produced a beat of analysts’ EPS estimates. The stock is up 4.3% since reporting and currently trades at $129.63. Read our full, actionable report on PulteGroup here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

It has been about a month since the last earnings report for PulteGroup (PHM). Shares have added about 2.4% in that time frame, underperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is PulteGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts. PulteGroup reported better-than-expected second-quarter 2026 results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate, but declining year over year.The quarterly results reflect reduced home-closing volumes, softer average selling prices (ASP) and margin compression. Ongoing softness in the housing market because of weaker consumer confidence and ongoing affordability challenges due to high mortgage rates hurt the top-line growth. Quarterly earnings were $2.48 per share, beating the Zacks Consensus Estimate of $2.38 by 4.2%. Earnings declined 18.2% from $3.03 in the prior-year quarter.Total revenues (Homebuilding & Financial Services) of $3.983 billion edged past the consensus mark of $3.980 billion by 0.1% but fell 9.6% year over year. Homebuilding segment’s revenues decreased 9.7% year over year to $3.89 billion. Home sale revenues fell 10.8% to $3.81 billion, reflecting weaker delivery volumes and lower average pricing. Land sale and other revenues increased to $78.9 million from $34.6 million.The number of homes closed declined 8.4% year over year to 6,997 units. Deliveries decreased across the Northeast, Midwest, Texas and West regions, while closings in the Southeast and Florida remained relatively stable. The ASP of homes delivered fell 2.7% to $544,000 from $559,000.Net new orders increased 6.4% year over year to 7,536 homes. Order growth was recorded across all buyer groups, supported by an 8% increase in average community count to 1,074. The dollar value of net new orders rose 5.1% to $4.08 billion.PulteGroup ended the quarter with a backlog of 10,966 homes, up 1.7% from the prior-year level. Backlog units increased in the Northeast, Florida, Midwest and Texas, while the Southeast and West reported declines. The value of homes in backlog slipped 0.6% to $6.80 billion. The divergence between higher units and lower value indicates that the average value of homes in backlog declined year over year, consistent with the company’s broader pricing pressure.Home sale gross margin contracted 200 basis points (bps) year over year to 25%. However, the metric improved 60 basis points sequentially from the first quarter of 2026, indicating some near-term stabilization in profitability.Selling, general and administrative (SG&A) expenses declined to $383 million from $390 million. However, as a percentage of home sale revenues, SG&A expenses increased 100 bps to 10.1%, as the lower revenue base reduced operating leverage. Financial Services revenues declined 4.2% to $96.9 million. Overall, the revenue mix reflected continued housing-market pressure as affordability constraints, volatile mortgage rates and economic uncertainty affected buyer activity.Mortgage origination volume decreased to 4,629 loans from 4,984, while origination principal fell to $1.98 billion from $2.16 billion. The mortgage capture rate improved modestly to 85.2% from 84.8%. PulteGroup ended the quarter with $1.38 billion in cash, cash equivalents and restricted cash. Notes payable totaled $1.82 billion, resulting in a debt-to-capital ratio of 12.3% and a net debt-to-capital ratio of 3.3%.Operating cash flow for the first six months of 2026 declined 58.1% year over year to $176.8 million, partly reflecting an $807.3 million increase in inventories. During the second quarter, PHM repurchased 3.1 million shares for $373 million. First-half repurchases totaled $681.2 million, representing 5.5 million shares. In the past month, investors have witnessed a downward trend in estimates revision. Currently, PulteGroup has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors. Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PulteGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. PulteGroup belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, D.R. Horton (DHI), has gained 3.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026. D.R. Horton reported revenues of $9.23 billion in the last reported quarter, representing a year-over-year change of +0%. EPS of $3.20 for the same period compares with $3.36 a year ago. D.R. Horton is expected to post earnings of $3.10 per share for the current quarter, representing a year-over-year change of +2%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.5%. D.R. Horton has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PulteGroup, Inc. (PHM) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

A month has gone by since the last earnings report for D.R. Horton (DHI). Shares have added about 6.6% in that time frame, outperforming the S&P 500. But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is D.R. Horton due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts. D.R. Horton reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.The earnings and revenue beat were driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, contributions from the Rental, Forestar and Financial Services businesses and the benefit of a lower diluted share count from share repurchases. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results. Consolidated revenues totaled $9.227 billion compared with $9.225 billion in the prior-year quarter. Income before taxes declined 9.7% year over year to $1.23 billion, while the pre-tax margin contracted to 13.3% from 14.7%.Net income fell 11.7% to $904.9 million from a year ago. Cost of sales increased to $7.08 billion from $7.02 billion, while selling, general and administrative expenses rose 5% to $991.2 million.The lower earnings reflected margin pressure rather than a meaningful decline in consolidated revenues. Management continued to balance sales pace, pricing, incentives and inventory levels across its communities. Homebuilding revenues increased 1.2% year over year to $8.69 billion. Homes closed rose 4% year over year to 23,983, reaching the high end of management’s guidance range for the quarter.Homebuilding pre-tax income declined 10.1% to $1.07 billion, while the segment’s pre-tax margin narrowed to 12.3% from 13.8%. The results show that higher delivery volume was not enough to offset the effect of weaker profitability.Net sales orders totaled 23,084 homes, nearly unchanged from the prior-year quarter level of 23,071 units. The value of orders was $8.44 billion, also broadly stable year over year. The cancellation rate increased to 20% from 17% in the year-ago period. Management said that affordability constraints and cautious consumer sentiment continued to affect new-home demand.Home sales revenues increased to $8.68 billion from $8.56 billion. The home sales gross margin fell to 20.7% from 21.8%, though it improved from 20.1% in the second quarter of fiscal 2026.Gross margin before interest and other costs was 24.7%, down from 25.7% a year earlier. Management expects sales incentives to remain elevated in the fiscal fourth quarter, with incentive levels depending on demand, mortgage rates and broader market conditions. The company ended the quarter with 38,000 homes in inventory, including 23,300 unsold homes. Completed unsold homes totaled 7,600, of which 600 had been completed for more than six months.During the first nine months of fiscal 2026, 67% of homes closed were built on lots developed by Forestar or third parties, up from 65% a year ago. This structure supports D.R. Horton’s effort to maintain flexibility in its land and lot investments.Homebuilding return on inventory declined to 17% for the trailing 12 months from 22.1% a year earlier. The decrease reflected lower trailing homebuilding pre-tax income against a relatively stable average inventory base. Rental operations generated revenues of $266.1 million (down 30.1% from a year ago) from the sale of 601 single-family rental homes and 339 multifamily rental units. The segment posted pre-tax income of $31 million (down 43.4% year over year) and a pre-tax margin of 11.6% (contracted from 14.4%).Forestar sold 3,659 lots and generated revenues of $407 million (up 4.2% from a year ago). Pre-tax income was $48.7 million (up 11.7% year over year), resulting in a margin of 12% from 11.2% a year ago.Financial Services recorded revenues of $220.7 million (down 3.1% year over year) and pre-tax income of $70.3 million (down 13.5%). The segment’s pre-tax margin was down to 31.9% from 35.7% a year ago, yet making it the company’s most profitable business by margin during the quarter. D.R. Horton continued to return cash to shareholders during the quarter. The company repurchased 4.2 million shares for $615.7 million and paid $127.1 million in cash dividends. Common shares outstanding totaled 280.7 million as of June 30, 2026, down 6% year over year, while the remaining repurchase authorization was $1.1 billion.Cash, cash equivalents and restricted cash totaled $2.13 billion at quarter-end compared with $3.03 billion at the end of fiscal 2025. Total liquidity remained solid at $6.1 billion, while the debt-to-total-capital ratio was 23%. The company also had $600 million of homebuilding senior notes maturing within the next 12 months. The board declared a quarterly dividend of 45 cents per share.Cash provided by operations was $880.8 million for the first nine months of fiscal 2026 compared with $949.1 million a year ago. Trailing 12-month return on equity was 12.8%, while return on assets was 8.5%, reflecting continued profitability despite lower year-over-year earnings. D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier. This compares with $34.25 billion in fiscal 2025.Homebuilding closings are projected to be between 83,800 and 84,300 homes (versus earlier projection of 86,000-87,500 homes). This compares with 84,863 in fiscal 2025.Income tax rate is expected to be approximately 25%.The company reiterated its expectations for at least $3 billion in operating cash flow, approximately $2.5 billion in share repurchases and about $500 million in dividend payments. It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.08% due to these changes. Currently, D.R. Horton has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the top 40% for value investors. Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, D.R. Horton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Toll Brothers, Inc. TOL is scheduled to report its third-quarter fiscal 2026 results on Aug. 18, after market close.In the last reported quarter, the company’s adjusted earnings and total revenues topped the Zacks Consensus Estimate by 5.4% and 5.1%, respectively. Year over year, both metrics declined 22.3% and 7.6%, respectively.TOL’s earnings surpassed estimates in three of the trailing four quarters and missed on the remaining occasion, with an average surprise of 2.6%. The Zacks Consensus Estimate for fiscal third-quarter earnings per share (EPS) has moved south to $2.89 from $2.90 in the past 60 days. However, the revised estimate indicates a 22.3% year-over-year decline.The consensus estimate for total revenues is pegged at $2.6 billion, indicating a 11.8% year-over-year decline from $3 billion. Toll Brothers Inc. price-eps-surprise | Toll Brothers Inc. Quote RevenuesDuring the fiscal third quarter, Toll Brothers’ top-line performance is expected to have declined year over year due to ongoing uncertainties in the housing market in the United States. Homebuyers’ sentiments are likely to have been weak as affordability challenges persist amid elevated mortgage rates and an uncertain economic scenario. Per Freddie Mac, the 30-year fixed mortgage rate has climbed from 6.37% as of the week ending May 7, 2026, to 6.66% as of the week ending July 30, 2026. Demand softness across the South, Mountain and Pacific geographic segments is likely to have restricted the revenue growth.For the fiscal third quarter, TOL expects home deliveries to be between 2,600 units and 2,700 units, indicating a decline from 2,959 units delivered in the year-ago quarter. We expect home deliveries to be down 9.8% year over year to 2,669 units.Nonetheless, the strength of its luxury positioning alongside the approach of offering affordable luxury homes is encouraging. Besides, the improvements in cycle times, increased supply of spec homes and favorable pricing measures are expected to have boded well in the fiscal third quarter.For the quarter, Toll Brothers expects the average selling price (ASP) of delivered homes to be within $965,000-$985,000, up from $973,600 in the year-ago quarter. Our model expects the metric to inch up year over year by 0.6% to $979,900 in the fiscal third quarter.Earnings & MarginsThe bottom line of Toll Brothers is expected to have tumbled in the fiscal third quarter due to low leverage from weak revenue growth, higher payroll costs and marketing and insurance costs. Besides, a shift in the mix of revenues to lower-margin products in certain geographic regions is expected to have weighed on the home sales gross margin during the fiscal third quarter.For the quarter to be reported, Toll Brothers expects adjusted home sales gross margin to be 25.25%, reflecting a 225-basis point (bps) contraction year over year. The homebuilder also expects SG&A expenses (as a percentage of home sales revenues) to be about 10%, up 120 bps year over year.BacklogFor the fiscal third quarter, our model expects a total backlog of 5,257 units, down year over year by 4.3%, with potential revenues declining 2.1% to $6.24 billion. Our proven model does not conclusively predict an earnings beat for Toll Brothers this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.TOL’s Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.TOL’s Zacks Rank: The stock currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here. NVR, Inc. NVR reported second-quarter 2026 results, with earnings and Homebuilding revenues missing the Zacks Consensus Estimate. Earnings and Homebuilding revenues also declined on a year-over-year basis.NVR’s quarter reflected stronger order activity and a lower cancellation rate, but fewer settlements, softer pricing and margin pressure weighed on results. Settlements fell 8% to 5,058 units from 5,475 units, limiting revenue generation during the period. Backlog units increased 9% year over year, while Homebuilding's gross margin contracted amid higher lot costs, affordability challenges and land deposit impairments.PulteGroup, Inc. PHM reported better-than-expected second-quarter 2026 results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate, but declining year over year.PulteGroup’s quarterly results reflect reduced home-closing volumes, softer ASP and margin compression. Ongoing softness in the housing market because of weaker consumer confidence and affordability challenges due to high mortgage rates hurt the top-line growth. Home sale gross margin contracted 200 bps year over year to 25%.D.R. Horton, Inc. DHI reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.The earnings and revenue beat were driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, and contributions from the Rental, Forestar and Financial Services businesses. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results. D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Toll Brothers Inc. (TOL) : Free Stock Analysis Report PulteGroup, Inc. (PHM) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report NVR, Inc. (NVR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). 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Interested in Capital One Financial Corporation? Here are five stocks we like better. Northrop Grumman beat Q2 earnings estimates and raised its 2026 guidance, citing a record $104.7 billion backlog amid ongoing defense demand tied to the war in Iran. D.R. Horton topped earnings expectations but cut its full-year delivery outlook as rising cancellations and price cuts signal a cooling housing market. Capital One and Charles Schwab both posted double beats in Q2, signaling improving momentum for the financial sector after a weak start to the year. As the second week of earnings season draws to a close, companies across several sectors are providing clues about what investors can expect for the remainder of the year. Of course, quarterly earnings and revenues are rear-facing metrics. But when combined with recent financial performances and full-year guidance, notable trends begin to emerge. Four companies—ranging from defense contractors to homebuilders to big banks—that reported earnings on Tuesday, July 21, are providing a glimpse into what the market may hold in the second half of 2026. → MarketBeat Week in Review – 07/20- 07/24 The energy sector hasn’t been the only beneficiary of the war with Iran. The ongoing war with Iran has also kept defense spending in focus, and the administration’s 2027 budget request proposes $1.5 trillion in total defense resources, although Congress has not enacted that amount. → Volatility Is Back and These 3 Market Tollbooths Are Best Positioned to Profit Northrop Grumman's (NYSE: NOC) Q2 earnings double beat offered further evidence of strong global demand for defense systems. Earnings per share (EPS) of $7.68 topped the analyst consensus of $6.82, while quarterly revenue of $10.88 billion—a 5.1% year-over-year (YOY) increase—surpassed expectations of $10.8 billion. But the biggest takeaway was that, with no end in sight for the war in Iran, Q2 serves as a precursor to what is likely to be a protracted global conflict. Northrop announced that it received net awards totaling $20 billion during the quarter, pushing its backlog to a record $104.7 billion. → 2 Stocks Built to Thrive If Inflation Refuses to Fade As a result, the company raised its 2026 sales guidance to $43.75 billion to $44.25 billion, with full-year adjusted EPS guidance of $28.60 to $29.10. Defense contractors have been pivotal in industrials’ outperformance this year. The sector ranks third with a year-to-date (YTD) gain of 15.18%, trailing only tech at 25.57% and energy at 30.84%. With institutional buying nearly doubling selling over the past 12 months, and a short interest of just 1.66% of the float, Northrop should continue to reward shareholders for the remainder of the year. With real estate stuck in limbo, homebuilder stocks have chopped around this year. D.R. Horton (NYSE: DHI) is the perfect example. Shares were up approximately 3.7% year to date (YTD) ahead of its fiscal Q3 earnings release. But now, the stock currently finds itself in one of those downtrends, After enduring six double-digit peaks or troughs, DHI is down a little over 3% YTD, and down nearly 15% from its three-month high. Much of that can be attributed to a stagnant—if not cooling—housing market. According to the latest House Market Index (HMI) survey, homebuilders cut prices by 37% in July, 35% in June, and 32% in May. That’s a bearish trend for housing, and the largest companies may be hanging their hopes on a potential interest rate cut from the Federal Reserve later this year. For D.R. Horton, that showed up in the company’s latest earnings report. EPS of $3.20 beat analyst expectations of $3.02. And while revenue of $9.23 billion beat expectations of $9.1 billion, the figure was essentially flat YOY—a concerning indicator for the housing market. Management noted that affordability constraints and cautious consumer sentiment continue to weigh on demand, with orders flat YOY and the company’s cancellation rate rising to 20% from 17% a year ago. D.R. Horton cut its full-year delivery outlook after demand softened later in the quarter, and now expects Q4 starts to be lower than Q3 while keeping gross margin roughly flat sequentially. That leaves investors with a mixed picture: The builder is still beating near-term expectations, but demand, pricing incentives, and margins remain under pressure. This year, the financials have performed third-worst among the S&P 500’s 11 sectors. But a string of earnings beats from major banks has improved the sector’s near-term momentum. The sector appears to have turned a corner, posting the third-best performance with a 7.28% gain. Capital One (NYSE: COF) and Charles Schwab (NYSE: SCHW) both posted a double beat in their Q2 earnings reports. Last year, Capital One doubled down on its efforts to challenge the duopoly of Visa (NYSE: V) and Mastercard (NYSE: MA) by expanding its in-house payment rails. Capital One completed its acquisition of Discover in May 2025, and Discover says card accounts will migrate to Capital One throughout 2026 and early 2027, with a major wave scheduled to begin July 27, 2026. On the earnings conference call, CEO Richard Fairbank said that 50% of Discover’s new-account originations were already on Capital One’s technology platform and that the company expected all new Discover originations to be on its technology stack by the end of Q3. The bank handily beat on earnings with EPS of $5.81 against analyst expectations of $4.79. However, the upshot was revenue, which rose 26.9% YOY to $15.83 billion, surpassing the consensus forecast of $15.76 billion. Meanwhile, Schwab posted record EPS and record quarterly revenue of $1.62 and $7.07 billion, respectively. Revenue increased 20.9% YOY, and management highlighted strong operating leverage and a 54.3% adjusted pre-tax profit margin. Trading activity and lending were major drivers of the quarter, with daily average trades reaching 11.9 million and bank loan balances rising to $67 billion, up 33% YOY. Looking forward, the company emphasized numerous longer-term growth initiatives, including crypto transfers, private markets, AI tools, tokenization infrastructure, and prediction markets tied to financial events. While these could expand the platform over time, they are in their early stages and therefore unlikely to materially affect 2026 results. For investors, the common thread is improving operating momentum. Both stocks may merit watchlist attention if earnings growth continues without a corresponding rise in credit or execution risk. The article "These 4 Earnings Reports Expose the Market’s Growing Economic Divide" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. D.R. Horton (DHI) has drawn fresh investor attention after completing a large buyback program and reporting its latest quarterly results, alongside affirming its regular cash dividend. See our latest analysis for D.R. Horton. D.R. Horton’s share price has slipped recently, with a 30 day share price return of down 11.86% and a 90 day share price return of down 8.22%. However, the 5 year total shareholder return of 61.86% still reflects a solid longer term outcome, suggesting recent sentiment has cooled despite the ongoing buyback and dividend affirmation. If D.R. Horton’s recent moves have you reassessing where growth and income might come from next, it could be worth broadening your search with 18 top founder-led companies D.R. Horton has been buying back stock while the share price has eased and earnings have softened, a mix that often tempts investors to move quickly. Is this a moment to act or a case for patience until valuation lines up? D.R. Horton’s most followed narrative pegs fair value at $165.29 per share, compared with a last close of $146.76. This points to a valuation gap that depends on how investors see future housing demand, margins and buybacks developing. Read the complete narrative. Curious what sits behind that view on D.R. Horton’s absorption rates and affordability focus? The narrative relies on specific revenue growth expectations, margin paths and shrinking share count to support that fair value. Result: Fair Value of $165.29 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, the D.R. Horton narrative still faces pressure from affordability strains, which can require heavier incentives, along with exposure to land cost inflation squeezing margins. Find out about the key risks to this D.R. Horton narrative. The narrative and fair value estimates for D.R. Horton are built around discounted cash flows, yet the current P/E of 13.4x tells a slightly different story. It sits a touch above both the US Consumer Durables industry at 13x and the peer average at 12.9x, which implies less obvious cushion if earnings or sentiment weaken. At the same time, that 13.4x P/E is well below the fair ratio of 26.1x, a level the market could move toward if investors eventually pay more for each dollar of earnings. The gap highlights a simple tension: is today’s pricing closer to a safety margin or to a premium that needs ongoing execution to hold? See what the numbers say about this price — find out in our valuation breakdown. If the mixed tone around D.R. Horton has you on the fence, move quickly to review the underlying data and benchmarks for yourself. You can start with 2 key rewards. Before moving on from D.R. Horton, consider lining up a few fresh stock ideas that fit different goals for risk, income and growth potential. Target value opportunities by scanning companies that combine quality fundamentals with attractive pricing using the 49 high quality undervalued stocks. Strengthen your income stream by focusing on stocks that offer higher yields and consistent payouts through the 9 dividend fortresses. Prioritize resilience by filtering for companies with healthier balance sheets and sturdier fundamentals using the solid balance sheet and fundamentals stocks screener (49 results). This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DHI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Comfort Systems USA, Inc. FIX delivered impressive second-quarter 2026 results, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing sharply year over year.The quarterly performance reflected continued strength across its end markets, robust execution by the operating teams and sustained demand that drove record backlog growth, reinforcing the company’s confidence in the business momentum. The company reported earnings per share of $12.53, which topped the Zacks Consensus Estimate of $10.38 by 20.7% and increased 91.9% from $6.53 reported in the year-ago quarter. Comfort Systems USA, Inc. price-consensus-eps-surprise-chart | Comfort Systems USA, Inc. Quote Revenues of $3.27 billion also surpassed the consensus mark of $2.94 billion by 10.96% and rose 50.3% from $2.17 billion generated in the prior-year quarter. Comfort Systems generated Mechanical segment revenues of $2.30 billion in the second quarter, up 40.1% from the prior-year quarter. The Electrical segment's revenues climbed 81.2% year over year to $969 million, reflecting strong demand across electrical contracting operations and contributions from acquisitions.Customer mix continued to underscore the dominance of technology-related work. Technology customers represented 58.7% of second-quarter consolidated revenues, followed by manufacturing at 16.4%, healthcare at 7.1%, education at 5.1% and government at 4.4%.Activity type also highlighted where project activity remained concentrated. New construction accounted for 75.1% of revenues, while existing building construction contributed 14.8%. Service projects represented 4.4% of revenues, and service calls, maintenance and monitoring comprised the remaining 5.7%, reinforcing the company's continued emphasis on large construction projects. Backlog as of June 30, 2026, totaled $14.06 billion, increasing 12.9% from $12.45 billion at March 31, 2026, and jumping 73.2% from $8.12 billion reported a year ago. On a same-store basis, backlog climbed to $13.70 billion from $8.12 billion in the year-ago period.The mix continued to skew toward the Mechanical segment, which represented 71.5% of total backlog ($10.06 billion), while the Electrical segment contributed 28.5% ($4 billion). The company also noted that approximately 65-75% of its remaining performance obligations are expected to be recognized as revenues over the next 12 months, providing healthy visibility into growth. Operating performance strengthened alongside the sharp increase in revenues. Gross profit increased to $844.2 million from $509.9 million a year ago, and gross margin expanded to 25.9% from 23.5%, reflecting improved project execution and operating leverage.Selling, general and administrative expenses increased to $287 million, but as a percentage of revenues, SG&A improved to 8.8% from 9.7%. Operating income climbed to $558 million from $299.9 million a year earlier, lifting the operating margin to 17.1% from 13.8%.Adjusted EBITDA rose to $600.5 million from $334.1 million in the year-ago quarter, while adjusted EBITDA margin expanded 300 basis points to 18.4%. As of June 30, 2026, Comfort Systems had cash and cash equivalents of $1.85 billion, up from $981.9 million at 2025-end. Long-term debt declined to $53.8 million from $139.1 million at Dec. 31, 2025, further strengthening the company's balance sheet.During the first six months of 2026, net cash provided by operating activities totaled $1.53 billion compared with $164.5 million in the year-ago period. Free cash flow increased to $1.24 billion from $113.1 million a year earlier. During the quarter, the company also paid dividends of 80 cents per share and continued repurchasing shares, reflecting its robust cash generation and shareholder return strategy. Comfort Systems currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PulteGroup, Inc. PHM reported better-than-expected second-quarter 2026 results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate, but declining year over year. The quarterly results reflect reduced home-closing volumes, softer average selling prices (“ASP”) and margin compression.PulteGroup ended the quarter with a backlog of 10,966 homes, up 1.7% from the prior-year level. Backlog units increased in the Northeast, Florida, Midwest and Texas, while the Southeast and West reported declines. The value of homes in backlog slipped 0.6% to $6.80 billion. The divergence between higher units and lower value indicates that the average value of homes in backlog declined year over year, consistent with PHM’s broader pricing pressure.D.R. Horton, Inc. DHI reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.DHI’s earnings and revenue beat was driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, and contributions from the Rental, Forestar and Financial Services businesses. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results. D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier.Lennar Corporation LEN reported mixed second-quarter fiscal 2026 results, with adjusted earnings topping the Zacks Consensus Estimate while revenues missed the same. Year over year, both metrics declined, given ongoing softness in housing demand and a lower ASP for homes delivered.LEN’s Homebuilding revenues declined 2% year over year to $7.62 billion from $7.84 billion, with home deliveries increasing 2% to 20,519 homes from 20,131 homes a year ago. Backlog at quarter-end increased to 16,818 homes from 15,538 homes. For the third quarter of fiscal 2026, Lennar expects home deliveries in the range of 20,500-21,500 and new orders between 21,000 and 22,000 homes. Gross margin on home sales is expected to be approximately 16%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report PulteGroup, Inc. (PHM) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

PulteGroup, Inc. PHM gave investors a mixed second-quarter readout. Earnings and revenues topped expectations, but both fell from the prior year as closings, pricing and margins weakened.The investment case now rests on balance. PHM offers capital returns, a solid balance sheet and modest price-target upside, but growth estimates and margins remain under pressure. Adjusted earnings were $2.48 per share, topping the Zacks Consensus Estimate of $2.38 by 4.2%. Total revenues of $3.983 billion edged past the consensus mark of $3.980 billion by 0.1%. PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote The beat did not erase the year-over-year decline. Earnings fell 18.2% from $3.03 per share, while total revenues decreased 9.6% as lower closings and softer average selling prices weighed on results. PHM’s $131 price target compares with a reported share price of $124.67, leaving only modest potential appreciation. That limits the valuation argument, even though the company continues to generate orders and return capital. The stock traded at 11.85 times forward earnings, above the sub-industry’s 10.88 multiple and PHM’s five-year median of 8.33. It still traded well below the broader construction sector and the S&P 500, keeping the valuation picture mixed rather than clearly cheap.D.R. Horton DHI and Lennar Corporation LEN remain relevant comparisons because both operate as national homebuilders facing similar affordability and margin pressures. D.R. Horton describes itself as the largest U.S. homebuilder by volume, while Lennar is commonly tracked alongside DHI and PHM in homebuilding comparisons. Current projections call for 2026 revenues of $16.404 billion, down from $17.312 billion in 2025. Expected earnings are $10.01 per share, compared with $11.44 in 2025. Estimates point to improvement in 2027, with revenues projected at $17.045 billion and earnings at $11.09 per share. The timing and durability of that recovery are central to whether PHM’s valuation can become more appealing. PHM repurchased 3.1 million shares for $373 million in the second quarter. First-half repurchases totaled 5.5 million shares, or roughly 3% of outstanding shares, for $681 million. The company maintained a quarterly dividend of 26 cents per share and had $1.8 billion remaining under its repurchase authorization. It is also funding land investment, though first-half operating cash flow fell to $176.8 million from $421.7 million as inventories increased. PulteGroup ended June with $1.38 billion in cash, cash equivalents and restricted cash. Its debt-to-capital ratio was 12.3%, while net debt-to-capital was 3.3%, giving the company financial flexibility in a softer housing cycle. The land pipeline also supports flexibility. PHM controlled about 228,000 lots, with 55% held through option agreements, limiting upfront ownership exposure when demand is uncertain. The bottom line is that PHM looks more balanced than broadly attractive. The earnings beat, buybacks and balance sheet help, but declining estimates and margin compression keep the risk-reward selective.PHM currently carries a Zacks Rank #2 (Buy), with a Value Score of B, Momentum Score of B and VGM Score of B. Those grades provide positive near-term signals, while the Growth Score of D reflects weaker projected earnings and sales trends. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The stock may suit investors focused on disciplined capital returns and balance-sheet strength. Investors prioritizing immediate growth may need clearer evidence that earnings, revenues and margins are stabilizing. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PulteGroup, Inc. (PHM) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

NVR, Inc. NVR reported second-quarter 2026 results, with earnings and Homebuilding revenues missing the Zacks Consensus Estimate. Earnings and Homebuilding revenues also declined on a year-over-year basis.The quarter reflected stronger order activity and a lower cancellation rate, but fewer settlements, softer pricing and margin pressure weighed on results. Backlog units increased 9% year over year, while Homebuilding gross margin contracted amid higher lot costs, affordability challenges and land deposit impairments.Following the results, NVR stock slipped 3.1% during yesterday’s trading hours. The company reported earnings of $83.96 per share, down 22.6% year over year and missing the Zacks Consensus Estimate of $94.82 by 11.5%. NVR, Inc. price-consensus-eps-surprise-chart | NVR, Inc. Quote Homebuilding revenues of $2.28 billion also missed the consensus mark of $2.41 billion by 5.2%. Revenues declined 10.5% year over year from $2.55 billion, reflecting lower settlement volumes and a decrease in the average settlement price. Consolidated revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.33 billion, down 10.4% on a year-over-year basis. Homebuilding revenues decreased to $2.28 billion from $2.55 billion in the prior-year quarter. Settlements fell 8% to 5,058 units from 5,475 units, limiting revenue generation during the period. Our model predicted settlements to decline 6.7% year over year to 5,107 units.The average settlement price declined 3% year over year to $450,700. The combination of fewer closings and a lower average price weighed on the segment’s top-line performance. Our estimate for the metric was $471,500. Homebuilding gross margin contracted to 19.2% from 21.5% a year ago. Profitability was pressured by higher lot costs, continued affordability challenges and weak consumer sentiment, which led to increased pricing pressure. Our estimate for the metric was 18.8%.The quarter also included approximately $21.7 million of contract land deposit impairments. Consequently, homebuilding income before taxes declined 30% year over year to $293.2 million. Mortgage closed loan production declined 13% year over year to $1.35 billion from $1.56 billion. Mortgage banking fees decreased to $46.6 million from $50.5 million.Mortgage banking income before taxes fell 14% to $25.4 million from $29.6 million. The capture rate, which represents the percentage of NVR homebuyers using the company’s mortgage services, decreased to 85% from 87%. New orders, net of cancellations, increased 9% year over year to 5,885 units. Growth was led by the South East, where orders rose to 2,228 units from 1,953 units, while Mid Atlantic orders increased to 2,081 units from 1,930 units.The average sales price of new orders declined 5% to $437,100. Our model predicted the ASP of new orders at $457,300. However, the cancellation rate improved to 14.9% from 16.5%, suggesting that a greater proportion of signed contracts remained intact during the quarter. Backlog totaled 10,998 units as of June 30, 2026, up 9% from 10,069 units a year earlier. The dollar value of backlog increased 5% to $4.99 billion.The average backlog price declined to $453,900 from $472,100. Average active communities increased to 442 from 426, expanding the company’s selling footprint while stronger order activity supported the year-over-year backlog increase. Homebuilding cash and cash equivalents were $1.09 billion as of June 30, 2026, compared with $1.88 billion at the end of 2025. Homebuilding inventory increased to $2.24 billion from $1.72 billion during the same period. Mortgage banking cash and cash equivalents were $50.9 million versus $32.6 million at year-end.NVR repurchased 54,716 shares during the quarter for an aggregate cost of $357.8 million. Shares outstanding declined to 2.68 million from 2.88 million a year earlier, helping offset part of the effect of lower net income on per-share earnings. Currently, NVR carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PulteGroup, Inc. PHM reported better-than-expected second-quarter 2026 results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate, but declining year over year. The quarterly results reflect reduced home-closing volumes, softer average selling prices (ASP) and margin compression.PulteGroup ended the quarter with a backlog of 10,966 homes, up 1.7% from the prior-year level. Backlog units increased in the Northeast, Florida, Midwest and Texas, while the Southeast and West reported declines. The value of homes in backlog slipped 0.6% to $6.80 billion. The divergence between higher units and lower value indicates that the average value of homes in backlog declined year over year, consistent with PHM’s broader pricing pressure.D.R. Horton, Inc. DHI reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.DHI’s earnings and revenue beat was driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, and contributions from the Rental, Forestar and Financial Services businesses. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results. D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier.Lennar Corporation LEN reported mixed second-quarter fiscal 2026 results, with adjusted earnings topping the Zacks Consensus Estimate while revenues missed the same. Year over year, both metrics declined, given ongoing softness in housing demand and a lower ASP for homes delivered.LEN’s Homebuilding revenues declined 2% year over year to $7.62 billion from $7.84 billion, with home deliveries increasing 2% to 20,519 homes from 20,131 homes a year ago. Backlog at quarter-end increased to 16,818 homes from 15,538 homes. For the third quarter of fiscal 2026, Lennar expects home deliveries in the range of 20,500-21,500 and new orders between 21,000 and 22,000 homes. Gross margin on home sales is expected to be approximately 16%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVR, Inc. (NVR) : Free Stock Analysis Report PulteGroup, Inc. (PHM) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

United Rentals, Inc. URI reported solid second-quarter 2026 results, with adjusted earnings per share and total revenues beating the Zacks Consensus Estimate and increasing year over year.Record rental revenues, higher fleet productivity and robust specialty demand supported the results. Fleet productivity improved 3.4% year over year. URI stock gained 8.3% during yesterday’s after-hours, following the earnings release. URI posted adjusted earnings of $12.76 per share, up 21.9% from $10.47 a year ago and surpassing the Zacks Consensus Estimate of $11.67 by 9.3%. United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote Total revenues advanced 11.8% to $4.41 billion and topped the consensus mark of $4.24 billion by 4.1%. Rental revenues increased 12.7% year over year to a quarterly record of $3.85 billion. Average original equipment at cost, or OEC, rose 7.1%. Owned equipment rental revenues increased 9% to $2.99 billion from $2.75 billion. Re-rent revenues rose 46.7% to $88 million, while ancillary and other rental revenues advanced 26.2% to $770 million.Sales of rental equipment increased 4.1% to $330 million. Sales of new equipment rose 14.7% to $86 million, contractor supplies sales increased 7.3% to $44 million and service and other revenues grew 6.3% to $101 million. General Rentals segment equipment rental revenues increased 6.6% year over year to $2.42 billion. Equipment rental gross profit rose 8.7% to $865 million, while gross margin expanded 70 basis points to 35.8%.Specialty segment equipment rental revenues rose 24.8% to $1.43 billion. Gross profit increased 21.1% to $636 million, but gross margin contracted 140 basis points to 44.4%. The decline reflected a revenue mix shift toward lower-margin ancillary and re-rent revenues, partly offset by lower labor and benefit expenses as a percentage of revenues. Gross profit increased to $1.73 billion from $1.53 billion. The gross margin improved to 39.3% from 38.9%, as revenue growth outpaced the increase in cost of revenues.Adjusted EBITDA rose 13.6% to a quarterly record of $2.06 billion. The adjusted EBITDA margin expanded 70 basis points to 46.6%, including a $49 million gain from the sale of part of the scaffolding business. Excluding that gain, the margin declined 40 basis points due mainly to the Specialty Rentals mix pressure.Net income increased 21.1% to a second-quarter record of $753 million. Net income margin expanded 130 basis points to 17.1%, including a $37 million after-tax benefit from the scaffolding transaction. For the first six months of 2026, net cash provided by operating activities increased 20.1% to $3.31 billion. Free cash flow declined 4.1% to $1.15 billion, including restructuring-related payments and gross rental equipment purchases of $2.72 billion.URI ended June with liquidity of $3 billion, including $112 million in cash and equivalents. Its net leverage ratio improved to 1.8x from 1.9x at the end of 2025.The company returned $998 million to its shareholders during the first half of 2026, comprising $750 million in share repurchases and $248 million in dividends. United Rentals expects to repurchase $1.5 billion of shares in 2026 and declared a quarterly dividend of $1.97 per share. Management raised its 2026 revenue outlook to $17.5-$17.8 billion from $16.9-$17.4 billion. The adjusted EBITDA forecast increased to $7.98-$8.13 billion from $7.63-$7.88 billion.United Rentals now expects net cash provided by operating activities of $5.85-$6.65 billion, compared with the prior projection of $5.4-$6.2 billion. The free cash flow outlook, excluding restructuring-related payments, was maintained at $2.15-$2.45 billion.Net rental capital expenditures are projected at $3.4-$3.8 billion after gross purchases of $4.85-$5.25 billion. Management cited large-project activity, customer backlogs and year-to-date momentum as factors supporting the higher outlook. Currently, United Rentals carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PulteGroup, Inc. PHM reported better-than-expected second-quarter 2026 results, with adjusted earnings and total revenues topping the Zacks Consensus Estimate, but declining year over year. The quarterly results reflect reduced home-closing volumes, softer average selling prices (ASP) and margin compression.PulteGroup ended the quarter with a backlog of 10,966 homes, up 1.7% from the prior-year level. Backlog units increased in the Northeast, Florida, Midwest and Texas, while the Southeast and West reported declines. The value of homes in backlog slipped 0.6% to $6.80 billion. The divergence between higher units and lower value indicates that the average value of homes in backlog declined year over year, consistent with PHM’s broader pricing pressure.D.R. Horton, Inc. DHI reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.DHI’s earnings and revenue beat was driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, and contributions from the Rental, Forestar and Financial Services businesses. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results. D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier.Lennar Corporation LEN reported mixed second-quarter fiscal 2026 results, with adjusted earnings topping the Zacks Consensus Estimate while revenues missed the same. Year over year, both metrics declined, given ongoing softness in housing demand and a lower ASP for homes delivered.LEN’s Homebuilding revenues declined 2% year over year to $7.62 billion from $7.84 billion, with home deliveries increasing 2% to 20,519 homes from 20,131 homes a year ago. Backlog at quarter-end increased to 16,818 homes from 15,538 homes. For the third quarter of fiscal 2026, Lennar expects home deliveries in the range of 20,500-21,500 and new orders between 21,000 and 22,000 homes. Gross margin on home sales is expected to be approximately 16%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Rentals, Inc. (URI) : Free Stock Analysis Report PulteGroup, Inc. (PHM) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report D.R. Horton, Inc. (DHI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Tuesday, July 21, 2026, at 8:30 a.m. ET Senior Vice President of Communications - Jessica Hansen President and Chief Executive Officer - Paul Romanowski Chief Operating Officer - Mike Murray Chief Financial Officer - Bill Wheat Operator: Good morning. Welcome to the third quarter 2026 earnings conference call for D.R. Horton, America's Builder. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton. Jessica Hansen: Thank you, Paul. Good morning. Welcome to our call to discuss our financial results for the third quarter of fiscal 2026. Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton on the date of this conference call. D.R. Horton does not undertake any obligation to publicly update or revise any forward-looking statements. Additional information about factors that could lead to material changes in performance is contained in D.R. Horton's annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. This morning's earnings release and our supplemental data presentation can be found on our website at investor.drhorton.com. We plan to file our 10-Q later this week. After this call, we will also post our updated investor presentation to our investor relations site on the presentation section under news and events for your reference. I will turn the call over to Paul Romanowski, our President and CEO. Paul Romanowski: Thank you, Jessica. Good morning. I'm pleased to also be joined on this call by Mike Murray, our Chief Operating Officer, and Bill Wheat, our Chief Financial Officer. The D.R. Horton team delivered a solid third quarter, highlighted by earnings per diluted share of $3.20. Consolidated pre-tax income totaled $1.2 billion on $9.2 million of revenues, resulting in a pre-tax profit margin of 13.3%. We closed 23,983 homes during the quarter, which was at the high end of our guidance range. Achieved a home sales gross margin of 20.7%. We remain focused on capital efficiency to generate strong operating cash flows and deliver compelling returns to our shareholders. Over the past 12 months, we generated $3.4 billion of cash from operations. Returned all of it to shareholders through repurchases and dividends. For the trailing 12 months and to June 30th, our home building pre-tax return on inventory was 17%, while our consolidated returns on equity and assets were 12.8% and 8.5%. Our return on assets ranks in the top 20% of all S&P 500 companies for the past three, five, and 10-year periods, demonstrating that our disciplined, returns-focused operating model delivers sustainable results and positions us well for continued value creation. We work every day to leverage our industry-leading platform, unmatched scale, efficient operations, and experienced teams to bring homeownership opportunities at affordable price points to more Americans. 65% of our mortgage company's closings this quarter were to first-time homebuyers. Our teams manage each community with discipline, balancing pace, price, incentives, and inventory levels to meet demand and maximize returns. Affordability constraints and cautious consumer sentiment continue to impact new home demand. Our operators will continue to adjust as market conditions evolve. Mike? Mike Murray Earnings for the third quarter of fiscal 2026 were $3.20 per diluted share compared to $3.36 per share in the prior year quarter. Net income for the quarter was $905 million on consolidated revenues of $9.2 billion. Home sales revenues in the third quarter totaled $8.7 billion on 23,983 homes closed, compared to $8.6 billion on 23,160 homes closed in the prior year quarter. Our average closing price was flat sequentially and down 2% year over year to $362,000. This is below the average price of new homes in the U.S. by approximately $155,000, or 30%, reflecting our continued focus on affordability. Bill? Bill Wheat: Net sales order value in the third quarter totaled $8.4 billion on 23,084 homes sold, both flat with the prior year quarter. Our cancellation rate for the quarter was 20%, up from 17% in the prior year period and from 16% sequentially, within our normal historical range. The average number of active selling communities increased 2% sequentially and 9% year over year. The average price of net sales orders was $365,600, essentially flat both sequentially and year over year. Jessica? Jessica Hansen: Our gross profit margin on home sales revenues in the third quarter was 20.7%, above the high end of our guidance range, reflecting lower stick and brick costs and slightly lower incentives than the second quarter. However, we expect incentives to remain elevated relative to historical levels. On a per square foot basis, home sales revenues and lot costs were flat sequentially, while stick and brick costs were down 2%. Year-over-year, home sales revenue was down 3%, stick-and-brick costs were down 5%, and lot costs were up 5%. We currently expect our home sales gross margin to be relatively flat in the fourth quarter compared to the third quarter. Bill? Bill Wheat: Our homebuilding SG&A expenses in the third quarter increased 8% compared to last year. SG&A as a percentage of revenues was 8.3%, up from 7.8% in the prior year quarter. We remain focused on managing our platform with discipline to gain market share efficiently, and we expect to return to positive SG&A operating leverage when revenue growth resumes and our average sales price and community absorption rates stabilize. Paul? Paul Romanowski We started 23,900 homes in the third quarter. We ended the quarter with 38,000 homes in inventory, down 1% both sequentially and year-over-year. 23,300 of our homes at June 30th were unsold. 7,600 of our total unsold homes were completed, of which 600 have been completed for more than six months. For homes closed in the third quarter, our median cycle time from home start to home close improved by roughly three weeks year-over-year. Our improved cycle times enable us to hold less housing inventory and turn it more efficiently. We expect starts in the fourth quarter to be lower than the third quarter. We will continue to manage our inventory levels and starts pace based on market conditions. Mike? Mike Murray: Our homebuilding lot position at June 30th consisted of approximately 570,000 lots, of which 22% were owned and 78% were controlled through purchase contracts. We continue to actively manage our investments in lots, land, and development based on market conditions. We remain focused on relationships with land developers across the country so we can build more homes on lots developed by others. This approach enhances our capital efficiency, returns, and operational flexibility. Our own lot position is down 13% from a year ago. In the third quarter, 67% of the homes we closed were on lots developed by either Forestar or third parties, up from 66% in the prior year quarter. During the third quarter, our homebuilding investments in lots, land, and development totaled $2.1 billion, including $1.5 billion for finished lots, $520 million for land development, and $75 million for land acquisition. Paul? Paul Romanowski: In the third quarter, our rental operations generated $31 million of pretax income on $266 million of revenues from the sale of 601 single-family rental homes and 339 multi-family rental units. At June 30th, our rental property inventory totaled $3 billion, including $2.7 billion of multi-family rental properties and $321 million of single-family rental properties. We remain focused on improving the capital efficiency and returns of our rental operations, and we currently expect our rental inventory to remain around $3 billion. Turning to our financial services operations, pretax income for the third quarter was $70 million on $221 million of revenues, resulting in a pretax profit margin of 31.9%. Mike? Mike Murray: Forestar, our majority-owned residential lot development company, reported third quarter revenues of $407 million on 3,659 lots sold, with pretax income of $49 million. At June 30th, Forestar's owned and controlled lot position totaled 92,000 lots. 66% of Forestar's owned lots are under contract with or subject to a right of first offer to D.R. Horton. During the third quarter, we purchased $360 million of finished lots from Forestar. Forestar's strong, separately capitalized balance sheet, national operating platform, and lot supply position them well to provide essential finished lots to the homebuilding industry and to continue aggregating significant market share over the next several years. Bill? Bill Wheat: Our capital allocation strategy remains disciplined and balanced, supporting an operating platform that delivers attractive returns and substantial operating cash flows. We maintain a strong balance sheet with low leverage and healthy liquidity, providing significant financial flexibility to adapt to changing market conditions and opportunities. At June 30th, we had $6.1 billion of consolidated liquidity, including $2.1 billion of cash and $4 billion of available capacity on our credit facilities. Total debt at quarter end was $7.1 billion, with $600 million of homebuilding senior notes maturing over the next 12 months. Our consolidated leverage at June 30th was 23%, and we continue to target leverage of around 20% over the long term. During the first nine months of the year, homebuilding cash provided by operations totaled $1.3 billion, and consolidated cash provided by operations was $881 million. During the third quarter, we paid cash dividends of $0.45 per share, totaling $127 million, and our board has declared a quarterly dividend at the same level to be paid in August. We also repurchased 4.2 million shares of common stock for $616 million during the quarter, reducing our outstanding share count by 6% compared to a year ago. At quarter end, our stockholders' equity was $23.8 billion, down 1% from a year ago, while book value per share increased 5% from a year ago to $84.85. Jessica? Jessica Hansen: Looking ahead to the fourth quarter, we currently expect consolidated revenues to be in the range of $8.8 billion-$9.3 billion, with homes closed by our homebuilding operations to be in the range of 22,500-23,000 homes. We expect our home sales gross margin for the fourth quarter to be in the range of 20.5%-21%, and our consolidated pretax profit margin to be between 12.3% and 12.8%. For the full year of fiscal 2026, we now expect consolidated revenues of approximately $32.5 billion-$33 billion, and homes closed by our homebuilding operations of 83,800-84,300 homes. We now forecast an income tax rate for fiscal 2026 of approximately 25%, and still expect operating cash flow of at least $3 billion, common stock repurchases of approximately $2.5 billion, and dividend payments of around $500 million. Paul? Paul Romanowski: In closing, our results and positioning reflect the strength of our experienced teams, industry-leading market share, broad geographic footprint, and focus on delivering quality homes at affordable price points. These are key components of our operating platform that support our ability to grow market share, generate substantial operating cash flows, and consistently return capital to our shareholders. We recognize the current volatility and uncertainty in the broader economy, and we will remain agile and disciplined as we focus on enhancing the long-term value of D.R. Horton. Finally, I want to thank the entire D.R. Horton family, our employees, land developers, trade partners, vendors, and real estate agents for your continued dedication and hard work. We remain committed to continuing to improve our operations and creating home ownership opportunities for even more individuals and families. This concludes our prepared remarks. We will now host questions. Operator: Thank you. At this time, we will be conducting a question-and-answer session. In the interest of time, we ask that participants limit themselves to one question and one follow-up on today's call. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question today is coming from John Lovallo from UBS. John, your line is live. John Lovallo: Good morning, guys. Thanks for taking my questions. The first one is that stabilization is something that we have heard numerous times in our channel checks, despite what has been continued volatility from not only an interest rate, but a geopolitical standpoint. Would you agree with that assessment, and do you think that we are getting to a point where we are starting to form a bottom here? Paul Romanowski: I would say that when looking at our sales, our sales were relatively in line with normal seasonality. They were a little softer post our call in April, and still see plenty of buyers out there in our sales offices as we travel and in front of people. It's just needing to see them be a little more confident in the overall economy and their ability to move forward with a purchase today. John Lovallo: Understood. You guys slightly pulled back, I think, about 3% on your full-year deliveries, despite being within, actually towards the upper end of the third quarter range, and with flattish orders on a year-over-year basis. I guess, is the trimmed outlook predominantly driven by just uncertainty in consumer confidence in geopolitics as we move into the fourth quarter? Is it a function of maybe lower than internally expected orders in the third quarter? Are you just moderating growth to maintain margin? Paul Romanowski: It was lower than our internal expected sales rate. We really needed to see a little better than normal seasonality in the quarter and felt like we could see that at the beginning of the quarter. That demand softened a little bit as we went through the quarter, and hence the reduction in our annual guide. Jessica Hansen: To your point, John, happy with the trade-off of what we were able to achieve from a gross margin perspective at the lower sales volume level. John Lovallo: Yeah, 100%. Thank you, guys. Operator: Thank you. The next question will be from Stephen Kim from Evercore. Stephen, your line is live. Stephen Kim: Yeah. Thanks very much, guys. Impressive results in what I consider to be a pretty tough environment. That's kind of related to my first question. When you think about the current environment and you look at your outlook for, let's say, long-term through cycle returns, how do these current results stack up relative to that? Do you regard your current returns as about average longer term? If not, what are the elements that you expect might push your returns higher or lower over the longer term? Bill Wheat: Yeah, Steve. Our current returns are lower than where we expect them to be longer term. Our margins, while in the longer-term historic range, we believe our longer-term stabilized margin should be a bit higher than this. Our operating margin, including our SG&A leverage, should be better than this over time when we're seeing some more consistent growth. We have not seen growth on our top line for a few years here. We're always positioning for growth, and so with a little better operating leverage. Frankly, I think we still feel like we have some opportunity to improve our capital efficiency in our homes and inventory and our land. We continue to focus on that. Overall, we would expect our returns on our capital, whether it's ROA, ROE, both to be higher longer term than they are right now. Stephen Kim: Well, that's encouraging, and appreciate that color, Bill. Second question kind of relates to scale. I think you talked about when growth returns, that's when you think SG&A could be leveraged, and that makes sense. However, I was curious if you could contextualize that given the fact that we've seen a lot of consolidation in the industry from competitors, let's say both foreign and domestic. I'm wondering if you can comment on how you think about your opportunity set from a scale perspective particularly. I know you've been hard at work generating a lot of economies of scale. Your volume is kind of stabilized here. You still talk about future growth. I'm curious, can you talk about what the importance of scale for you to achieve the efficiencies that you desire? Should we be thinking there's another sort of step function higher in volume that could unlock some of these opportunities? Maybe you could think about it a little differently. You could walk us through that. Thanks. Paul Romanowski: Steve, when you look at our scale today or at our revenues and absorption being relatively flat over the last couple of years, that's while we have been expanding our footprint. We've opened 30 or so markets over the last five years. We've lacked some leverage on our SG&A because of creating that footprint. I think that footprint geographically puts us in a great position as we see demand rebound a little bit. We see some strengthening in consumer confidence and demand. We feel we're in a great position to gain scale nationally. We also feel very good about our positioning at a local level. That scale is still very important to us. We see the benefits of it, believe in it, talk about it, and still have our operators in a position to maintain their position in the market and grow when the opportunity is there for us. Jessica Hansen: As a reminder, we're only number one, only, in half of the markets we operate in today. We still have a lot of opportunity to continue to grow our share locally across the country. Stephen Kim That's great perspective. Appreciate that, guys. Operator: Thank you. The next question will be from Alan Ratner from Zelman. Alan, your line is live. Alan Ratner: Hey, guys. Good morning. Thanks for the detail so far and taking my question. Obviously, very impressive results on the gross margin. It looks like a lot of that has been driven by really strong cost controls. I'm curious, as you think about the cost environment today, obviously, you've done a great job of pushing back on suppliers and trades and driving down costs where you can. Where do you think you are in that process? Because as we look at least the announcements on Canadian Concrete, I'm not sure how big of a piece of your business that is. Fuel remains elevated. Do you feel like there's still further room to drive costs lower, or is there a risk over the next handful of quarters that could actually reverse given all of those headwinds I just mentioned? Paul Romanowski: We lost a little bit of your question, Alan, I think I got the gist of it. We've seen good improvement in our cost containment efforts in comparison to the prior year. It's an ongoing battle. There is certainly some headwind out there right now with some fuel cost increases. I don't believe the recently announced Canadian tariff changes are going to have a material impact on D.R. Horton and our footprint. I'm looking for us to hang on to, perhaps squeeze out a little additional cost improvements in future quarters. It's more challenging now, just as you get closer to an optimal state to get significant improvement going forward. Alan Ratner: Thanks very much. Operator: Thank you. The next question will be from Matthew Bouley from Barclays. Matthew, your line is live. Matthew Bouley: Morning, everyone. Thanks for taking the questions. Wanted to ask on incentives. I think you said the incentives were slightly lower quarter-over-quarter. You mentioned demand softened a bit during the quarter, looked like finished spec came up slightly, and obviously interest rates are where they are. It seems like obviously you're still guiding to that flattish sequential gross margin going forward. Maybe you just kind of unpack what's assumed around incentives there and why wouldn't there be kind of an incremental incentive headwind going forward? Thank you. Bill Wheat: In the current environment, we saw a slight improvement in incentives, but as Paul mentioned, it was a bit softer later in the quarter. We do expect incentives to remain elevated. As Mike just discussed, we may still see some stick and brick savings, but we have achieved a lot of what we expect to achieve today. Really, where we see where we are is a relatively stable outlook going into the next quarter. Obviously, a lot of our sales and our closings in the quarter occur in the same quarter, so there's still some uncertainty around what may be required going forward. Right now, the visibility we have points to a relatively stable margin going into Q4. Matthew Bouley: Okay. Got it. Thank you for that. Then, secondly, stepping back, wanted to ask about your exposure to the first-time buyer. I think it looks like you're around two-thirds today, first-time buyer, and we can go back any number of years. Once upon a time, that was half the business, maybe even less than half the business. It's been a very steady mix towards that first-time buyer. Given the state of the first-time buyer today, would you say that the kind of two-thirds of the business you're at now maybe stabilizes? Do you expect it to actually continue to move higher, if you kind of look at it as we are kind of the answer to the affordable needs of the country today, or would you actually look at it and say, "You know what? Maybe we actually do want to mix a little bit back towards that kind of first-time move-up buyer." Just curious on how you're positioning the business from that perspective on a multi-year timeframe. Thank you. Paul Romanowski: The positioning of our business today lends itself to still seeing significant portion of our buyers, I think, in that two-thirds range as first-time homebuyers. There's some opportunity to go up some. We'll certainly take it. If we see more buyers out there, we're happy every day to sell them a home. That said, as we penetrate markets, we also take the opportunity to move upmarket a little bit. I think blending that at a community level and at a division level, our operators are charged every day to find the market, go meet that market. I would expect us to see a first-time homebuyer segment relatively consistent with what we see this quarter. Matthew Bouley: All right. Well, thank you, Paul. Good luck, guys. Operator: Thank you. The next question will be from Eric Bosshard from Cleveland Research. Eric, your line is live. Eric Bosshard: Good morning. The stick and brick down 5%, curious where you're seeing that, if labor is a meaningful piece of that. The path forward you expect from here and how this is influencing or contributing to gross margin. Jessica Hansen: Sure, Eric. The majority of the savings we're seeing is still on framing, which would be inclusive of labor. As I think we've talked about previously, we pay for a lot of things turnkey, so we can't split it out for you perfectly, labor versus materials. Framing was our biggest cost category of savings. Very positively, though, across all of our major cost categories, we saw a decline in terms of our costs on closings in the third quarter. So I think we expect that to hold at least into Q4. Maybe into 2027, we start to have a slight lumber headwind again with where lumber prices have gone, we feel good for at least the next quarter or so. Eric Bosshard: In terms of how that is supporting gross margin or supporting the ability to increase incentives, how are you thinking about that or planning that, or how is that playing out? Mike Murray: The stick and brick cost structure and incentives in our mind are kind of separate things. We think about the home we want to deliver on the lot, try to build it as efficiently as possible, and then look to go to market with the appropriate price and incentives that stimulate demand in the marketplace to get the pace we need to drive the return we need, and then manage the return on the basis of trying to pull back or increase incentives to stimulate demand or to improve margin. Two separate parts of the equation for us. Eric Bosshard Secondly, you were relatively clear that in the quarter, a little less volume, a little bit more margin. Is this the path forward strategically? I know it moves around, but is that kind of plan A from here? Paul Romanowski: That was our plan this past quarter, and we're going to respond to the market based on what we see quarter to quarter, month to month, really week to week. We're managing our business, I think, very efficiently, responding to the market as it comes to us. Our operators did a great job of delivering on the quarter. In terms of our guidance in closings and in margin, we did make the decision to hold margin a little more than push into the units, and hence the reduction in our guide for the year. We're going to continue to manage the business as efficiently as we can to drive the best returns that we have at a community level. Eric Bosshard: Thank you. Operator: Thank you. The next question will be from Sam Reid from Wells Fargo. Sam, your line is live. Sam Reid: Thanks so much, everyone, good quarter. You gave a lot of helpful color on lot cost inflation. I believe it was up 5% year-over-year in the third quarter. Curious as to what's embedded for lot cost inflation in the fourth quarter, and then contextualize where you see that line item potentially tracking into next year, whether you expect to get some help just from slack in the horizontal supply chain, or whether there could be some implications from higher oil costs on some of those horizontal lot inputs. Thanks. Paul Romanowski: We expect to see similar lot cost appreciation. Although we're seeing some savings and some benefit in the development cost, that won't come through for several quarters, well into 2027 and 2028, anything that we are seeing today. Expect to see similar level of lot cost inflation as we head into the fourth quarter. Sam Reid: That's helpful. Maybe let's switch gears and quickly touch on SG&A. There was a step-up in SG&A spend on a dollar basis. Realize there was probably some community count embedded in that. Just if you could contextualize some of the levers behind the higher year-over-year homebuilding SG&A dollars, just so we can understand how we should be thinking about that, both for the quarter and also for FQ4. Thanks. Bill Wheat: Yeah, Sam, the primary driver of the SG&A has been our community count increase. Our active communities were up 9% year-over-year. Our total dollar spend of SG&A was up 8%. Relatively in line there, and that's been a trend for the last two to three years as we've added 30 markets over the last several years. Yet our volume, our absorptions per community have declined a bit, our overall revenues have not increased. We've been adjusting our ASPs to meet the market as well. We've had some de-leveraging over the last couple of years, but at the point at which we do begin to see stabilization in pricing and in absorption pace, we would expect then to be in position to get forward operating leverage on SG&A. Right now, we're in a position where we've built the infrastructure, we need to see the growth coming off of that in the future. Sam Reid: Thanks so much. I appreciate it. Operator: Thank you. The next question will be from Ryan Gilbert from BTIG. Ryan, your line is live. Ryan Gilbert: Hi. Thanks. Good morning, everyone. I wanted to circle back on the finished spec inventory question. It does look like finished specs are up around 2,100 homes sequentially. I think that's more than the typical sequential increase. Is that more than you expected, and is that tied to some of the softer results in the, I guess, May and June versus what you saw in mid-April? How should we think about potential gross margin implications for rightsizing the spec count? Mike Murray: When we look at the spec counts, it's a function of a few things. One is some improvements that we continue to see in our construction cycle times. We're finishing homes faster. At the same time, our average selling communities are up 9%, so that's up more than those completed specs are up. Therefore, we have fewer per community at this time. The other part, to the forward margin piece, those completed specs are very recently completed. You can look at our age specs, and they're actually down a few hundred units year-over-year. We feel pretty good about going into the fourth quarter, able to provide a stable margin guide. Jessica Hansen: Yeah, as we said in the scripted part, we do expect our Q4 starts to be lower than Q3, and we'll continue to adjust our starts accordingly based on the demand that we're seeing. Of our total completed specs, only 600 have been completed and unsold for greater than six months, and that's actually down from 800 sequentially. To Mike's point, the vast majority of our completed specs are very fresh. Ryan Gilbert: Right. Okay. Yep, that makes sense. Thanks. Second question is on community count growth. I think you've talked in the past about that growth rate decelerating to kind of a mid-single digit rate at some point in time. I'm just wondering, given the continued declines in the controlled lot count, should we recalibrate that mid-single digit growth rate expectation, or do you think you can continue to grow community count despite lower controlled lots? Jessica Hansen: I think that would still be our base case over the longer term, is that our goal would be to have a roughly mid-single digit community count growth. It can be a little bit choppy. It's actually been sticky at the low double digits for quite some time. We did see a slight moderation to a 9% increase on a year-over-year basis this quarter, and 2% sequentially. Did start to see it trend down modestly and would still expect it to trend down to mid-single digit over time. Ryan Gilbert: Okay, great. Thanks so much. Operator: Thank you. The next question will be from Anthony Pettinari from Citi. Anthony, your line is live. Anthony Pettinari: Good morning. I was wondering if you could talk about any meaningful regional variation you're seeing in terms of demand and any MSAs that stand out as being stronger or weaker. I guess, related question. We've heard about some MSAs with tech exposure being strong, like Bay Area, some others, like Seattle being weak. Is there anything you're sort of observing there? It's kind of sometimes hard to tell whether that's a plus or a minus. Paul Romanowski: I think what you just mentioned is consistent with what we're seeing, and fairly consistent with what we talked about last quarter on the call, is that across really what we show as our north operating area, which is the Mid-Atlantic states, the Ohio Valley, the Midwest, seeing relative strength in most of those markets. A little more weakness out in the Northwest and especially as you look up into Seattle, where we've seen some of the shift in the software jobs, and more layoffs and some headwinds to demand in those markets. That's pretty consistent with what we've seen through this quarter. Anthony Pettinari: Okay. Okay. Any other regional variations that you'd highlight in terms of, I don't know, Sun Belt or Northeast or? Paul Romanowski: Yeah. The Florida markets seem to be performing pretty consistently at this point in time. Some of the same across the Southeast, so it's been pretty encouraging. Anthony Pettinari: Great. Great. I guess one last one. Stick and brick costs down year-over-year. You've taken down cycle times year-over-year. Is there sort of a theoretical limit or floor for cycle times? Just generally, how should we think about that? Paul Romanowski: You'll never hear us say there's a floor in terms of our ability to run our business more efficiently. That said, the reduction has come more from complete to close than it has from our start to complete. In other words, in the construction cycle time, we've come down maybe a day, I think, sequentially. Most of that reduction has been from complete to close. Our focus in the field and in our operations in our communities is to sell the homes earlier in the process. We're building homes at the most efficient rate that we have in the history of the company, we need to get back to selling homes earlier in the process. That will help reduce that overall start-to-close cycle time, we do think there's some room to bring that down further. Anthony Pettinari Understood. I'll turn it over. Operator Thank you. The next question will be from Rafe Jadrosich from Bank of America. Rafe, your line is live. Rafe Jadrosich: Hi. Good morning. Thanks for taking my question. First, can you remind us the lag between when lumber prices move and when it shows up in your gross margin for delivered homes? Bill Wheat: It usually takes a few quarters for that to come through based upon how we're kind of priced to an average price at the point of purchase order, and then those homes have to go through the production process to be sold and closed to show up in margin. It's usually a few quarters. Rafe Jadrosich: Sorry, a few quarters, three? Bill Wheat: Yeah. Two to three quarters is fair. Rafe Jadrosich: Two to three quarters. Okay. The second question, your operator's been pretty nimble, sort of balancing margin and volume. Coming earlier this year, it seemed like there was more of a push into the volume in the first half. There's been an adjustment here. Can you just talk about maybe what you're seeing out there that caused that shift? Is it where 3Q orders came in? Is it the outlook for the fourth quarter? What would it take to sort of get you to shift back to more aggressive volume, given the growth ambitions you have longer term and the strong pipeline? Paul Romanowski: Our efficiency and reduced cycle times have allowed us to respond inter-quarter to those changes in demand. I think that's really what you saw with our second quarter, where we saw a strong early spring selling season allowed us to increase our starts pace, respond to that, and then we adjust in kind. I think when throughout this past quarter, we saw the market soften a little bit, and that's why we're anticipating to see our starts rate in the fourth quarter be below what it was this past quarter. Really it's our operators, to your point, being nimble, responding to the market, and being out there on the ground every day, responding to the market that comes at them. Rafe Jadrosich: Thank you. That's very helpful. Operator: Thank you. The next question will be from Trevor Allinson from Wolfe Research. Trevor, your line is live. Trevor Allinson: Hi. Good morning. Thank you for taking my questions. First question is back on incentives and your rate buydown program. With rates moving higher through the quarter, have you made any adjustments to those programs? If so, can you talk about what rate you are buying down to on average currently, and how does that compare to recent quarters? Jessica Hansen: It was actually the first quarter that we did see our rate in backlog tick up because of that move in rates. We saw our average buydown decrease slightly to 1.6% from 1.7% in the second quarter. The mortgage rate for our buyers in backlog utilizing our mortgage company at June 30th was 4.9% against, call it, a rough market rate of about 6.5%. We're still in the market pretty consistently, with anywhere from, call it, 4.99%-5.5%, depending on mortgage product. We have an array of offerings, so you'll find some things outside of that band, but that'd be the largest piece of our offering today. Trevor Allinson: Okay. Thank you for that, Jessica. Second question. Last quarter, you talked about selling specs earlier in the construction cycle, expecting that to provide some gross margin benefits. Can you quantify or at least talk about any of the benefit you saw in Q3 from that process? Should we expect incremental tailwinds from selling earlier in the construction process in Q4? Thanks. Paul Romanowski: We definitely did see probably, on those closings, a lower incentive level having to be offered. At the same time, it provides a much greater efficiency to the turn of the inventory in the selling process earlier, so that as soon as the construction process is complete, the buyer's gone through the mortgage qualification process, and they're excited and ready to move into their home. Jessica Hansen: Certainly more room for improvement, though. We saw a step up in those closings this quarter, but it's not where we ultimately want it to be. Trevor Allinson: Thank you for all the color, and good luck moving forward. Paul Romanowski: Thank you. Operator: Thank you. The next question will be from Susan Maklari from Goldman Sachs. Susan, your line is live. Susan Maklari: Thank you. Good morning, everyone. My first question is on the rental side of the market. Can you talk about what you're seeing there, especially post the housing legislation that passed, and how you're thinking about the outlook in terms of that part of the business? Paul Romanowski: We certainly saw, until it was settled, some uncertainty in that market, a pullback on the single-family for-rent purchasers. We have seen them out there with interest. Haven't seen a significant shift as of yet. It's fairly new in terms of that legislation being activated, but feel good about our position there. We have those opportunities and continuing to work with the buyers that have been with us in the future and look for new buyers for that segment. Susan Maklari: Okay. That's helpful. Thinking about the priorities of capital allocation, you reiterated the guide for the $2.5 billion of buybacks. I guess considering, though, where you are already coming into this quarter and the seasonality of the cash flows, how should we think about the potential for some upside there? What are you watching for to get more active in that? Can you talk about any other priorities in terms of capital allocation? Bill Wheat: Our share repurchases and dividends are governed by our cash flow. Right now, our visibility to cash flow is still to meet or exceed $3 billion. Our year-to-date spend on repurchases has been in excess of our cash flow year to date. Obviously, we expect a strong cash flow performance in Q4 to get that more in line. Right now, we don't really have visibility to any upside to any large extent on our current year repurchases. We will monitor cash flow as we move through the quarter and adjust accordingly. Susan Maklari: Okay. Thank you. Good luck. Operator: Thank you. The next question will be from Mike Dahl from RBC Capital Markets. Mike, your line is live. Mike Dahl: Morning. Thanks for taking my questions. Maybe to expand on Susan's question, can you just broaden out and give us your perspective now that the ROAD to Housing has officially passed, you know all the final details? Give us your view on kind of puts and takes and whether or not anything really is impactful, aside from what you just commented on the SFR or BTR dynamic. Paul Romanowski: I think one of the biggest impacts will be on the SFR. It's settled down for institutional investors, their ability to operate in their business without a required sale. I think that is certainly a benefit. We're encouraged by the fact that there's still a lot of focus on affordability and on deregulation. I think that has the biggest long-term impact or opportunity at the state level. Then really it has to come down to a local level, municipal and county level, where we see some deregulation opportunity. We're hopeful for that. We see more of that discussion today throughout our communities, don't expect to see any significant shift or change in either demand or supply in the near term from what was just passed. Mike Dahl: Got it. Okay. Appreciate that. Just shifting gears back to the land dynamic. Your land acquisition spend in particular has been coming down, and obviously that's alongside the lot count. Can you just give us your perspective on the land market right now and how you're managing that? It seems like, for the time being, even as you enter new markets and try to build those positions, you're comfortable with moving to the sidelines a bit on acquisition or shrinking your lot count a little. Just curious to get your updated views on how that market's evolving. Mike Murray: We're certainly trying to have our land acquisition efforts in line with what we see as market demand right now. There are some markets that we've been able to rework some of our lot position, lot portfolio, working with our developers. Been very pleased with their partnership and working through some changes along those lines. At the same time, there's still opportunities we see where it still makes great sense to go out and tie up new positions. We're probably buying less raw dirt in the most recent quarters than we have in a while. We'll probably continue that trend a bit right now because there's a fair number of lots that are in the pipeline, both under control by us and that are available from some of our development partners to look at. Jessica Hansen: Our focus is to continue to manage it more efficiently and own fewer lots where we can if we're still in position to be in control of our starts pace, which will govern our revenue. We have about 1.5 years of owned land today, which is down from 1.6 years sequentially and 1.7 years year over year. More importantly, we control 6.7 years. We're in a great position, even with our lot count coming down a little bit. We're pleased that our owned lot count has come down, we still control almost seven years of land overall. Mike Dahl: Great. Appreciate that. Thanks. Operator: Thank you. The next question will be from Buck Horne, from Raymond James. Buck, your line is live. Buck Horne: Hey, thanks. Good morning. I was just wondering if you could go back to the inter-quarter demand trends a little bit, just as it relates to the can rate. I'm just wondering, as demand kind of seasonally softened into May and June, I was wondering if you saw, was the can rate also the increase there back-end loaded, or was it more of a slowdown in kind of the incoming gross orders or some combination of both? Bill Wheat: Yeah. It was a little bit of both. As we saw a bit of softening mid-quarter into the later part of the quarter, our can rate did tick up alongside that. That was something that our operators were adjusting through the quarter. Jessica Hansen Even our exit rate, though. Buck Horne: Okay. Jessica Hansen: rate-wise for the quarter, was still well within our normal historical range. Buck Horne: Awesome. That's helpful, Jessica. Appreciate that. What were the largest reasons for cancellation in the quarter? Was it ability to qualify or just cold feet or any other reasons? Bill Wheat: Yeah, it's still largely qualification as it historically has been. We have a general lack of confidence. We'd love to see a bit more confidence among our buyers today, qualification is still largely the biggest reason for cans. Buck Horne: Got it. Thanks, guys. Appreciate it. Operator: Thank you. The next question will be from Kenneth Zener from Seaport Research. Kenneth, your line is live. Kenneth Zener: Good morning, everybody. Jessica Hansen: Morning, Ken. Paul Romanowski: Morning, Ken. Kenneth Zener: Hello. Just checking. On the gross margin beat, can you talk to Your regional segment results are very consistent versus other builders. What led to the modest beat that you guys had? Was it regional mix? Can you talk to these newer 30 markets, which you said have higher SG&A, do they also have higher gross margins? Thank you. Jessica Hansen: No, typically a new market wouldn't have higher than normal gross margins. It takes a little while for them to live into that on both the gross margin and SG&A front. Kenneth Zener: Yep. Jessica Hansen: That'd be a little bit of a drag compared to our company averages. Paul Romanowski: I think mostly that margin beat is the efforts in cost reduction, it's stick and brick. It's seeing those come through now with the efforts that our operators have been focused on for some time, that's largely where we saw, I think, the difference in the margin beat. Slight reduction in incentives as well, as we adjusted throughout the market and took the position to hold onto a little bit of margin instead of leaning into absorption. Kenneth Zener: Okay. Then you talked about 4Q starts being below 3Q, which is not heroic. Last year, your starts were 14,500. Is that the range that we should be thinking about given that occurred last year? I'm just trying to think about your base of inventory units, which historically you said are ending inventory times 2. That was your long-term revenue outlook. Now you're a little more efficient, so it could be higher than that, but I'm trying to think where you're bringing starts in 4Q and inventory for your 2027 positioning. Paul Romanowski: Certainly seeing 4Q starts inside of 3Q. While that's not heroic, it will be more starts probably than we had last year in the fourth quarter. That was deliberately suppressed to try to bring inventory back in line. Largely, it's going to be dependent upon the sales environment we see through the quarter and positioning for our September 30th inventory. A 2 times turn had been a historical norm for us. Today, we're looking in excess of that, and our internal goals are to get that to 3. We'll be close Kenneth Zener: Really. Okay. Do appreciate it. Thank you. Operator: Thank you. The next question will be from Jade Rahmani from KBW. Jade, your line is live. Jade Rahmani: Thank you very much. Just the multifamily inventory, given where rates are and cap rates in the market as well as supply overhang, what's the outlook for stabilizing and moving that inventory? Paul Romanowski: We write at about $3 billion in terms of our total. That's split largely between apartments at $2.7 billion and around $320 million in our build for rent. Our focus on the build for rent has really been on a forward sale, we don't need to grow that much other than if we see demand for that, we'll be able to build into it. We're looking to hold that inventory stable at about that 3 billion mark. Mike Murray: The multifamily, we do expect to close a few more units in Q4, expect that inventory to come down a bit, in Q4, then in aggregate, keep the overall rental inventory, multi and single, within the $3 billion range. A bit coming down in the short term, though. Jade Rahmani: Thank you. On the technology side, I was wondering if there's anything in off-site manufacturing or AI you're seeing that looks promising. The housing legislation included some manufacturing housing incentives, and maybe that's an area of potential synergy. Just curious about your thoughts there. Paul Romanowski: We continue to evaluate opportunities to deliver the housing more efficiently. Looking at a wide number of off-site manufacturing processes and players that are trying to crack the code there. We haven't yet found anything that's replacing the way we've done it for a long time that can do it more efficiently. We are continually looking and evaluating. Jade Rahmani: Thank you. Operator: Thank you. The next question will be from Jay McCanless from Citizens. Jay, your line is live. Jay McCanless: Good morning, everyone. My first question, nice to see the backlog price up year-on-year for the first time in several quarters. I guess, is that just a function of mix, or were you guys able to find some pricing power in some of these markets? Paul Romanowski: I think that's largely a function of mix. We do have pricing power in some markets, and when that opportunity is there, our operators are going to take it at the community level. Some of that slight reduction in incentives as well, if it's in our rate buydowns, will add back to the revenue column. Jay McCanless: Got it. The second question, just kind of looking at July, rates have been moving up pretty aggressively. I guess, what have you seen so far on traffic and demand? Also as part of that, what are you seeing from competitive inventories, especially on the entry-level and first-time buyer side? Paul Romanowski: I don't know we've seen much change in inventories. I think that the industry as a whole has been relatively disciplined and trying to measure that towards demand. Still early in July for us to forecast, and we're responding daily in the field and at point of sale to meet what's in front of us. Jay McCanless: Got it. All right. Thank you. Operator: Thank you. The next question will be from Alex Barrón from Housing Research Center. Alex, your line is live. Alex Barron: Yes, thank you. I'm sorry if this was asked in a different manner, on the single-family rental side, it seems the business has sort of been winding down. Is that the basic idea of what's going to happen, or is this going to come back at some point? Mike Murray We had taken the business from one in which we developed the entire neighborhood, stabilized the neighborhood, and sold it as a fully stabilized rental property, to one in which we're working with those institutional and owners of those properties to basically deliver units to them as we complete construction. They're responsible for the lease-up and stabilization process of it. We do the site identification, acquisition, development. They do the lease-up and stabilization process and ownership. Jessica Hansen: There was probably a little bit of a gap while there was a lot of. Mike Murray: Yeah, transition. Jessica Hansen: There was uncertainty until we knew how the actual act was going to come out. I think those buyers now can be more comfortable to move forward. We certainly are not winding that business down, and could do more of it going forward, depending on investor appetite. Mike Murray: It's a more efficient model, so we will operate it with a lower inventory balance than we had historically in the SFR business. Alex Barron: Will it still show like an on-balance sheet type business where you report revenues and closings and stuff? Or is it more of an off-balance sheet or JV or something like? Mike Murray: Same. Not a JV. Alex Barron: Okay. Mike Murray: Selling homes that are completed to third parties. Alex Barron: On the multifamily side, it seems like you guys still have a lot of assets committed, it doesn't seem like there's too many revenues coming out of there lately. Can you expand on what the future looks like? Mike Murray: We do expect an increase in revenues in Q4 from our multifamily business. There are a number of projects that are under contract, are completed, are stabilized, so we've got a little bit of a back-end-weighted revenue base here for fiscal 2026. As we look into fiscal 2027, we do have an active pipeline that is working and expect to continue to add to that over time. The revenues have been a bit inconsistent quarter-to-quarter. Alex Barron: Okay, appreciate it. Thank you, guys. Jessica Hansen: Thanks, Alex. Mike Murray: Thank you. Operator: Thank you. That does conclude today's Q&A session. I will now hand the call over to Paul Romanowski for closing remarks. Paul Romanowski: Thank you, Paul. We appreciate everyone joining us today. We look forward to sharing our fourth quarter and full-year results with you on Thursday, October 29th. To the entire D.R. Horton team, congratulations on a solid third quarter. Thank you for all that you do. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in D.R. Horton, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and D.R. Horton wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $370,332!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,272,280!* That performance is why people listen. 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Horton (DHI) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool