HORTON D R INC /DE/

Final HORTON D R INC /DE/ Annual Review for Investors

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1. What They Do & This Year’s Snapshot

D.R. Horton builds and sells homes across the U.S., focusing on single-family homes (84% of sales) for first-time buyers, move-up families, and luxury markets. Key divisions:

• Homebuilding (92% of revenue, down from 94% last year)
• Financial Services (mortgages/title services)
• Rental Homes (single-family rentals and apartments)

2023 Highlights:

• Closed 84,863 homes (down 5% from 2022) at an average price of $424,100 (up 3%).
• Maintained title as #1 U.S. homebuilder for 21 straight years.
• Joined the S&P 500, boosting visibility.
• Majority-owned Forestar Group secured land for 300,000+ future homes – a major growth pipeline.

Land Strategy:

• Uses low-risk contracts (like deposits) to control land without overcommitting cash.
• Owns 94,200 acres of ranch land (held for 20+ years) for agriculture and company events.

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2. Financial Performance: Growth or Decline?

• Revenue: Dropped 7% to $34.3 billion (from $36.8B in 2022).
• Gross Profit: Fell to $6.8 billion (from $8.0B) due to higher construction costs and buyer incentives.
• Net Profit: Down ~5% to $4.5 billion.

The Takeaway: Sold 5% fewer homes but made 3% more per home. Higher mortgage rates and discounts hurt sales volume and margins.

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3. Wins & Challenges

Wins:

• Affordability Edge: Average home price ($424k) beats Pulte ($450k).
• Financial Services helped 75% of buyers lock mortgage rates (critical as rates hit 7%).
• Expanded to 126 markets (from 118 in 2022).
• Sustainability Progress: Settled a decade-old environmental issue ($400k penalty + cleanup) and released 2025 sustainability goals.

Challenges:

• Profit per home dropped to $0.12 per dollar (from $0.13).
• Rental growth missed targets (1,200 units added vs. 1,500 goal).
• Forestar’s profits dipped (13.2% pre-tax margin vs. 17.9% in 2022).

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4. Financial Health Check

• Cash: $3.1 billion (up 8%) – enough to build 8,300+ homes.
• Debt: Up 12% to $5.8 billion, but structured with low rates and long deadlines (2030-2035).
• Dividends/Buybacks: Returned $1.4 billion to shareholders.

Forestar’s Position:

• Cash dropped to $379 million (from $481M), but controls 99,800 lots (up 5%).
• Debt includes $379M due in 2026 – manageable but needs refinancing.

Verdict: Strong cash reserves and staggered debt payments provide stability.

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5. Risks to Watch

• Construction Costs: Rose 6% in 2023 – could climb another 5-7% by 2026.
• Land Delays: 15% of Forestar projects stuck in permitting.
• Rental Demand: Occupancy dipped to 92% (from 95%).
• Cybersecurity Threats: Rising phishing scams using AI – though the company added a dedicated security team.
• Supply Chain Bets: Locked-in material prices could backfire if costs drop.

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6. vs. Competitors

• #1 Homebuilder, beating Lennar and Pulte.
• Key Advantages:
  • Builds homes 20% faster than rivals.
  • Forestar’s land bank is 2x larger than Lennar’s.
  • In-house mortgages give financing edge.

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7. What’s Next?

• Rental Push: Target 5,000 units/year by 2025.
• Tech & Sustainability: Using AI for permits and boosting energy-efficient designs.
• Acquisitions: Buying regional builders to speed up land access.

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Bottom Line for Investors

D.R. Horton is a resilient industry leader with a land bank and financing arm that rivals can’t match. While revenue dipped in 2023 (blame higher rates and cautious buyers), closing 84k homes in a tough market shows strength.

Opportunities: Affordable pricing, rental expansion, and sustainability efforts.
Risks: Rising costs, land delays, and cyber threats.

Best For: Long-term investors who value steady players over flashy growth. Keep an eye on their rental business and cost management in 2024.

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Note: Always do your own research or consult a financial advisor before investing. 😊