Oct 29, 2026 earnings call — Guidance and inventory management amid high rates
Full-year revenue guide of 30 to $32 billion and Q1 home sales gross margin 18% to 18.5%.
Revenue $9.4B (est $9.1B) · EPS $2.67 (est $3.01) · Next-quarter revenue outlook $30.0B–$32.0B
Key quotes
"We started 13.1 thousand homes in the September quarter."
"We expect continued pressure on our home sales gross margin in the first quarter reflecting a lower average sales price and higher incentive costs at current mortgage rates and we expect our incentive levels to remain elevated in fiscal 2027."
"We distributed $4.1 billion to our shareholders through share repurchases and dividends during fiscal 2026."
Analyst Q&A 17
Gross margin outlook vs long term
Q (Stephen Kim · Evercore): Analyst asked if the 18% to 18.5% gross margin guide represents a new longer-term level given a shift to more entry-level product, and also asked what mortgage rate environment they assume.
A: Management said the 18% to 18.5% range reflects current market conditions with elevated incentives and weak consumer confidence. They still believe there is long-term opportunity for higher gross margins, but they are not expecting meaningful rate declines in the near term and are assuming elevated rates in their guidance.
"No, Steve. I feel that the 18% to 18.5% is more indicative of the current market conditions that we see." — Paul J. Romanowski (CEO)
Construction costs and cash flow drivers
Q (Alan Ratner · Zelman): Analyst asked what drove the uptick in construction costs and cycle times (labor, materials, enforcement), and how cash flow guidance holds steady despite margin pressure.
A: Management said lumber increases and some labor inflation pushed stick-and-brick costs higher; first-quarter guide assumes stick-and-brick flat to slightly up and lot costs flat to slightly up. They also said improved cycle times let them turn inventory faster and reduce rental asset levels, which frees cash beyond the P&L and supports the $3.5 billion cash flow guide.
"We see opportunity to continue to, improve the efficiency of our balance sheet as we have improved our cycle times" — Bill W. Wheat (CFO)
Revenue drop vs deliveries drop
Q (John Lovallo · UBS): Analyst asked why consolidated revenue is down more than deliveries and whether that delta is due to ASP, rental, or financial services; also asked if spring selling season might be better absent shocks.
A: Management said the revenue shortfall is predominantly from a lower expected ASP and they will not assume ASP improvement until it shows in results. They also said buyers remain interested but consumer sentiment and noise are restraining actions, and they hope the spring proceeds without further shocks.
"it is predominantly being driven by a lower expected ASP." — Jessica Hansen
Rate buydowns and traffic trend
Q (Sam Reid · Wells Fargo): Analyst asked if buydowns are held at a fixed spread to market rates and how traffic trended through the quarter into October.
A: Management said they moved the buydown rate up as rates rose and they generally average about 1.5 points below market, with a high take rate among buyers. They added that demand weakened as the quarter progressed, traffic and sales activity were lower than a normal seasonal pace, and buyers were being cautious and tentative.
"We would expect to stay, at about 1.5 points below market is kind of where we have been averaging." — Jessica Hansen
Protect margin vs growth pace
Q (Matthew Bouley · Barclays): Analyst asked whether they will protect margin at expense of volume after Q1 or if decisions remain market dependent, and how reduced starts help negotiating direct costs.
A: Management said it is market dependent at the community level and each operator balances pace, price, and margin to maximize returns. They also said operators continuously work with trades and LaborSource to drive better stick-and-brick value, and starts were reduced to align inventory with market demand.
"It will be market dependent at the community level, frankly, Matt." — Michael J. Murray (COO)
Building smaller homes and lot prices
Q (Eric Bosshard · Cleveland): Analyst asked if the company is creating lower-priced or smaller homes for affordability, and whether lot prices will come down to match lower selling prices.
A: Management said they continuously adjust product, building more smaller homes and smaller lots to hit monthly payments that enable homeownership. They noted average square footage is down 4% over five years and attached closings have risen to roughly 16% of mix, and they said the land market is slow to reset though future development could come in at better pricing absent fuel inflation.
"To put some numbers around Paul's context, we are down 4% in our average square footage over the last 5 years, and we have also seen an increase in our number of attached closings, so predominantly duplexes and townhomes." — Jessica Hansen
Cost split and competitive dynamics
Q (Anthony Pettinari · Citi): Analyst asked to disentangle labor versus material cost changes and how smaller private builders are responding—dropping out, consolidating, or creating opportunities for Horton.
A: Management said it is hard to provide exact splits because labor and material prices change month to month and some lumber increases showed up later in closings; fuel surcharges also affected costs. They added that higher rates and inflation make delivering affordable product harder, but weaker markets create opportunities to consolidate share and to acquire homebuilding operations from smaller builders.
"But we will see more pressure with the higher rate environments and inflationary cost environment, it is Does make it more challenging to deliver affordable product to the market today." — Jessica Hansen
Demand differences by market size
Q (Ryan Gilbert · BTIG): Analyst asked if demand varied between larger established markets and newer smaller markets Horton entered, and whether smaller markets held up better.
A: Management said smaller and secondary markets with less inventory and competition have generally held up better and produced more consistent sales in line with expectations and budgets. They said larger markets face more competition and inventory build-up, which makes demand more challenged when overall demand is lower.
"those have held up a little better, and we have seen more consistent sales in line with our expectations and budgets." — Paul J. Romanowski (CEO)
Resale supply and year-end margin reasons
Q (Michael Rehaut · Melius): Analyst asked about resale supply increases in Texas and Florida and whether the gross margin moves are from year-end inventory flushing or a market reset.
A: Management said resale inventory has ticked up and can impact move-up buyers with contingencies, but it is not yet at a concerning level; they need the resale market to unlock for normal movement. They also said the near-term gross margin pressure reflects current market conditions rather than a deliberate year-end flush, and that Q1 is seasonally slow while rates and incentives are expected to remain elevated.
"it is not necessarily indicative of us trying to flush inventory in the fourth quarter." — Jessica Hansen
Delivery assumptions and litigation impact
Q (Rafe Jadrosich · BofA): Analyst asked what assumptions underlie the wide delivery range (absorption pace, community count, starts) and asked to bridge the warranty/litigation impact from Q4 to Q1 gross margin.
A: Management said community count grew about 2% sequentially and they assume below-normal absorptions due to current rates and sentiment, which creates a wider range of potential outcomes. They also said they have had above-normal litigation this quarter; typical warranty and litigation run rate is about 40 to 50 basis points negative to gross margin, but this quarter was about 80 basis points, roughly 40 basis points higher than normal.
"Our typical run rate in our gross margin is about 40 to 50 basis points of a negative impact to gross margin for both warranty and litigation" — Jessica Hansen
Buybacks versus land spending
Q (Morgan Stanley): Analyst asked how to think about prioritizing repurchases versus land investments given the earnings and macro outlook and noted repurchase pace variability.
A: Management said capital allocation and repurchases are set based on projected cash flows and can vary quarter to quarter; they plan for $3 billion of repurchases and keep flexibility to be opportunistic. They also said land investment pacing is consistent and they have a good supply of lots, so they do not need to materially change lot supply timing.
"we set our capital allocation and our repurchases based on our projected cash flows." — Bill W. Wheat (CFO)
Buyer qualification and closings guide
Q (Michael Dahl · RBC): Analyst asked how buyer qualification has changed as rates rose and why the closings guide is not wider or lower given worsening order trends.
A: Management said higher rates cause some buyers to drop out but they adjust costs and incentives to help buyers qualify; quality traffic remains strong with FICO around 720 and cumulative loan-to-value about 90%. They added that community count is significantly up so the guide can tolerate slightly lower absorption, and they will adjust guidance as the year progresses based on market conditions.
"we continue to see good quality traffic come through our door in terms of our closings, our FICO score has remained very high at 720." — Jessica Hansen
Developer behavior and land strategy
Q (Wolfe): Analyst asked if developer partners are halting development and how Horton would change land strategy as developers deplete assets, and whether to expand geographically or consolidate footprint.
A: Management said developers are adjusting deliveries and Horton communicates with third-party developers to align timing and avoid too many lots being out in front. They said Horton has entitlements and flexibility to ramp if demand returns and will stay opportunistic—both consolidating share in current markets and entering new markets when teams and opportunities align.
"I think they are definitely adjusting deliveries and future deliveries and we do a very good job, I believe, of communicating with our third party development partners to make sure that they are managing their business along with ours" — Paul J. Romanowski (CEO)
SG&A outlook and barriers to affordability
Q (Susan Maklari · Goldman Sachs): Analyst asked about ability to keep SG&A leverage as volumes slow and about the role of alternative models (build-to-rent/own) in affordability solutions.
A: Management said SG&A efficiency remains a strong focus, but lower ASPs and volumes put pressure on leverage while they preserve the platform to take advantage when conditions stabilize. They also said the biggest obstacle to affordability is local resistance to developing smaller lots and product; removing those local barriers would let the market deliver more affordable housing.
"I think some of the biggest obstacles to affordability are at the local community and resistance to development of smaller lots and smaller product" — Michael J. Murray (COO)
Rental impairments and land development flex
Q (Jay McCanless · Citizens): Analyst asked about the rental-segment impairment and why rental returns will be lower in 2027, and whether Horton should lean into self-developing land now.
A: Management said the spike in interest rates lowered expected values on some completed rental projects, triggering impairments and dampening multifamily forward-sale margins; single-family rental returns should improve due to forward-sale investor commitments. They also said Horton has the flexibility to self-develop or buy developed lots on a deal-by-deal basis and will do so when it makes sense.
"In the current environment with the spike up in interest rates in this last quarter, that had a negative impact on our expected values on a number of those projects." — Bill W. Wheat (CFO)
Growth vs margin focus if rates stay high
Q (Alex Barrón · Housing Research Center): Analyst asked whether Horton will prioritize units (growth) or margins/returns if rates remain high, noting peers focused on even-flow production.
A: Management said for the past decade-plus they have balanced pace and margins to drive returns and will continue that approach—growing market share when possible and protecting returns when markets are tougher. They emphasized a consistent focus on returns and being opportunistic about share and expansion while maintaining their culture of high standards.
"If we look back 12, 13 years, we have been focused on kind of a balancing pace growth with margins to drive to returns." — Michael J. Murray (COO)
Broker commissions and construction robotics pilot
Q (Buck Horne · Raymond James): Analyst asked if external broker commissions are likely to rise in 2027 and asked about the robotics/panelization partnership in Arizona.
A: Management said the percentage of homes sold via brokers has remained consistent and overall realtor expense is flat in the forward guide, with a 2.90 basis-point impact this quarter that was consistent sequentially and year over year. They also said the robotics effort in Phoenix is a pilot for panelization to try to build homes more affordably and they are watching it closely.
"I think that our overall rate in terms of percentage that we utilize brokers has remained consistent" — Paul J. Romanowski (CEO)