Can D.R. Horton Outperform Peers Amid Supply-Chain Stabilization?

D.R. Horton, Inc. DHI has been able to navigate the challenging homebuilding market conditions since the start of fiscal 2025 due to its disciplined operating model. Despite the ongoing pressures from affordability issues and cautious consumer sentiments, the company’s net sales orders inched up 0.3% year over year to 23,071 in the third quarter of fiscal 2025.

DHI strategically manages pricing, incentives and sales pace across its markets in a manner that optimizes returns on inventory investments. Besides, one of the key drivers of the company, during such tough times, is its improvement in construction cycle times. During the first nine months of fiscal 2025, its construction cycle times improved by a few weeks from the comparative period in fiscal 2024.

Moreover, its focus on maintaining and growing healthy relationships with land developers across the country, while engaging in the development of more homes on lots developed by others, is encouraging for its prospects and offers it a competitive edge. This strategic move highlights the enhancement of capital efficiency, returns and operational flexibility.  As of June 30, 2025, DHI’s homebuilding lot position was 601,400 lots, wherein 24% were owned and 76% were controlled through purchase contracts.

Thus, as supply chains stabilize and costs trend lower, D.R. Horton’s scale, disciplined capital allocation and operational efficiency suggest it could outpace peers in both margins and market share. Even though higher homebuying incentives remain a headwind, DHI’s balanced approach in managing pace and price has allowed it to sustain strong returns, evidenced by a 22.1% homebuilding pretax ROI (as of trailing 12 months ended June 30, 2025) and consistent cash generation ($5.5 billion liquidity as of June 30).

Does D.R. Horton Face Competition in the Homebuilding Market?

D.R. Horton operates in the United States homebuilding space with key competitors including Lennar Corporation LEN and KB Home KBH.

D.R. Horton’s scale is unmatched, as it has consistently maintained the top position in terms of closings and revenues. Its “value to move-up” strategy allows the company to target multiple buyer segments, from entry-level to luxury homes, giving it broader market exposure than Lennar and KB Home. While Lennar has a strong presence in the move-up and active adult markets and KB Home focuses heavily on first-time buyers with customizable home designs, D.R. Horton’s operational efficiency and wide product mix give it flexibility across changing demand environments.

By combining scale, diversification and financial discipline, D.R. Horton remains better positioned to weather industry challenges and capitalize on opportunities, thereby strengthening its leadership relative to Lennar and KB Home.

DHI Stock’s Price Performance & Valuation Trend

Shares of this Texas-based homebuilder have soared 40.1% in the past three months, significantly outperforming the Zacks Building Products - Home Builders industry, the broader Zacks Construction sector and the S&P 500 Index.

DHI stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 14.12, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.

EPS Trend of DHI

For fiscal 2025 and fiscal 2026, DHI’s earnings estimates have trended upward in the past 60 days. The revised estimated figure for fiscal 2025 implies a year-over-year decline of 17.8% but that of fiscal 2026 indicates 2.2% growth.

In the near term, the in-house efforts might not scale the bottom line, but the mid and long-term prospects seem to be improving, with analysts being optimistic about DHI’s potential.

D.R. Horton stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research