D.R. Horton: Berkshire’s Re‑Entry and the Financials Behind a Cyclical Hook

Berkshire’s Q2 Move Is the Catalyst — but the balance sheet is the story#

Berkshire Hathaway’s reported re‑entry into homebuilders in Q2 2025 — including a material stake in D.R. Horton — is the proximate market event that reset investor attention on [DHI]. The media narrative quantified combined exposure to the two builders at the center of the trade at hundreds of millions; some outlets placed the pair near $1.8 billion in market value with roughly $200 million attributed to D.R. Horton specifically (see reporting by AInvest) AInvest — Berkshire Hathaway $1.8 Billion Bet AInvest — Warren Buffett Strategic Shift Investments (DHI & LEN). That signal matters for sentiment; what will determine outcomes, however, is DHI’s operating resilience through elevated mortgage rates and the company’s financial flexibility.

On the fundamentals front D.R. Horton reported FY2024 revenue of $36.80B and net income of $4.76B (filed 2024-11-19). The firm ended FY2024 with $4.52B of cash, total debt of $5.97B and total stockholders’ equity of $25.31B, leaving net debt of $1.45B — a liability position that is modest relative to EBITDA and equity. Those balance‑sheet figures, more than the headlines, are the primary reason large, patient investors find DHI’s cyclical exposure acceptable: the company can fund incentives, repurchases and dividends while waiting for any policy‑led demand recovery.

Recent operating performance: modest growth, healthy margins, but cash conversion weakened#

D.R. Horton’s top line expanded at a measured pace in FY2024. Revenue rose from $35.46B (FY2023) to $36.80B (FY2024), a change of +3.78% year‑over‑year. Gross profit held at a robust level relative to the sector — $9.54B, or 25.91% gross margin in FY2024 — while operating income of $6.11B produced an operating margin of 16.61% and a net margin of 12.92%. These margin levels remain attractive for a high‑volume builder, albeit below peak levels seen in 2022 when gross margin benefitted from more favorable cost and pricing dynamics.

The liquidity and cash generation picture is more nuanced. FY2024 free cash flow was $2.02B (free cash flow margin ≈ 5.49%), down from $4.16B in FY2023 — a decline of about -51.44% using the raw FCF numbers. Operating cash flow dropped from $4.30B (FY2023) to $2.19B (FY2024), a fall of roughly -49.07%. The reduction in cash conversion reflects working capital swings and sector‑wide order softness as higher mortgage rates pressured buyer activity. These cash‑flow dynamics are meaningful because DHI’s capital return activity (share repurchases of $1.79B in FY2024 and dividends totaling $395.2M) is funded from operating cash; a sustained squeeze in OCF would pressure buybacks and discretionary investment.

Table: Income statement trend (FY2021–FY2024)

These figures are taken from D.R. Horton’s FY financial statements filed on 2024‑11‑19 (FY2024) and earlier filings. The margin compression from 2022 to 2024 is consistent with an industry facing higher incentive spending and a product‑mix shift toward smaller, lower‑ASP homes.

Calculated leverage and liquidity — conservative in a cyclical industry#

DHI’s balance sheet tells a straightforward story of low net leverage and substantial current liquidity. Key computed metrics (all using FY2024 year‑end balances) include a net debt of $1.45B (Total debt $5.97B less cash $4.52B), a simple debt‑to‑equity ratio of 0.24x (5.97 / 25.31 = 0.236), and a current ratio of ~17.04x (Total current assets $34.75B / Total current liabilities $2.04B). Net debt to FY2024 EBITDA calculates to roughly 0.23x (1.45 / 6.37), indicating very low leverage on an EBITDA basis at period end.

Table: Balance sheet & cash flow highlights (FY2021–FY2024)

All balance sheet and cash flow numbers are from D.R. Horton’s FY financial statements (filed 2024‑11‑19 and prior filings). The company’s ability to maintain cash above the $3–4B range through the cycle is material to its optionality: it can offer rate buy‑downs or incentives without immediate financing stress.

Important data discrepancies and how they change the read#

A careful read of the data set surfaces a few conflicting metrics, which matter for valuation and leverage interpretations. The commonly referenced market P/E in the market quote block is 13.46x (price $167.50 / EPS $12.44 as shown in market quotes). However, trailing TTM metrics in the fundamentals show net income per share TTM = $13.03, which produces a lower trailing P/E of ~12.85x at the same price. Similarly, the dataset provides a reported debt‑to‑equity figure of 30.36% in one table and our balance‑sheet calculation using year‑end totals produces ~23.6% (5.97 / 25.31). These inconsistencies likely arise from different denominators (e.g., market cap vs book equity, or average equity vs year‑end equity) and from timing differences between quote snapshots and TTM metrics.

Where conflicts appear, the most conservative approach is to rely on the company’s audited period balances for balance‑sheet ratios and use TTM per‑share metrics for valuation multiples — but always to disclose the method. That approach preserves comparability across peers and emphasizes the underlying financial capacity rather than transitory market snapshots.

Competitive positioning: scale, affordability and the tradeoffs#

D.R. Horton’s strategic differentiation is its scale and focus on entry‑level and affordable housing. The company’s national footprint and operating scale produced 13.6% market share in 2024 (industry reporting) and allows DHI to underprice or out‑execute smaller regional builders when absorption returns. That scale underpins gross margins and gives DHI land sequencing optionality: the firm reported control of a multi‑hundred‑thousand‑lot portfolio, approximately 613,100 lots in the contemporaneous reporting cited by industry coverage, with about 75% under contract (The Builders Daily analysis) The Builders Daily — Horton's Dominance Analysis.

The tradeoff is clear: DHI’s concentration in entry‑level product makes sales highly sensitive to mortgage rates and monthly payment shocks. Recent operational indicators — higher cancellations and weaker net sales orders — have tracked that sensitivity. By contrast, peers with higher average selling prices or more liquidity (for example, Lennar’s larger cash position cited in some coverage) have different tradeoffs and optionality in how they manage incentives and land acquisition.

Interest rates: the dominant external swing factor#

Mortgage rates are the single largest external variable for DHI’s near‑term performance. While the company can adjust product mix, shrink floorplans and raise incentives to preserve absorption, those actions compress gross margins. Industry commentary and DHI’s own FY2024 results show that margin compression through incentives and mix shifts was the proximate cause of year‑over‑year pressure from 2022 peaks.

Analysts and institutional investors who bought into DHI during the Q2 2025 window are effectively betting on either Fed‑led rate relief or wage and credit improvements that materially restore affordability. The binary nature of the call — rates fall and backlog rebuilds, or rates remain elevated and sales remain muted — is reflected in the dispersion of sell‑side targets and the market’s reaction to incremental macro news.

Capital allocation: active buybacks, consistent dividend, and cash discipline#

D.R. Horton returned significant capital in FY2024: $1.79B in share repurchases and $395.2M in dividends. That activity occurred while the company maintained a strong cash balance and a controllable debt profile. The dividend per share is $1.60 annually (four quarterly payments of $0.40 each in 2024–2025) giving a yield of roughly +0.96% at the current price of $167.50.

The financing of buybacks from operating cash is important: in FY2024, buybacks of $1.79B were funded alongside dividends and land activity while operating cash flow contracted materially versus FY2023. That implies management is prioritizing shareholder distributions within a constrained cash environment, a choice that boosts per‑share metrics but reduces flexibility if the operating cash recovery stalls. For large, well‑capitalized investors like Berkshire, that tradeoff may be attractive — cash returns today plus balance‑sheet optionality — but it requires sustained access to cash or credit lines if selling conditions deteriorate further.

Valuation and sentiment: a premium on balance‑sheet durability and scale#

At the current quote of $167.50 and market capitalization near $49.94B, DHI trades around a trailing P/E in the low‑to‑mid teens depending on the EPS series used (~13.46x using EPS $12.44 per market quotes, or ~12.85x using TTM net income per share $13.03). The market is pricing a premium to several long‑run averages for the stock, and pockets of sell‑side optimism explicitly reference Berkshire’s stake as a sentiment amplifier. Analysts’ forward multiples (forward P/E ranges by year in the dataset) show a view that earnings should normalize or grow into the multiple as the cycle turns.

That premium is defensible if DHI’s margin profile and cash generation re‑establish nearer‑term normality without material balance‑sheet stress. It is less defensible if operating cash flow remains volatile and the company must meaningfully increase incentives or cut buybacks to preserve liquidity.

What this means for investors#

Investors should treat Berkshire’s Q2 2025 stake as an input to sentiment — not a substitute for balance‑sheet and cycle analysis. The company’s FY2024 numbers show a builder with scale, positive net income, low net leverage and significant cash. Those attributes create optionality through a downturn and make the stock a candidate for patient, macro‑sensitive investors who see Fed easing or mortgage rate normalization in the next 12–18 months.

At the same time, DHI’s sensitivity to mortgage rates, the fall in operating cash flow and the active use of buybacks during a period of softer cash generation are real constraints. If mortgage rates remain elevated and cancellations persist, the company will face a tradeoff between supporting demand via incentives and preserving capital returns.

Key takeaways#

D.R. Horton’s FY2024 results and balance sheet present a mixed but explainable picture. Revenue of $36.80B and net income of $4.76B show continued profitability. Liquidity — $4.52B cash and net debt of $1.45B — is a structural advantage in a cyclical trough. Cash flow weakened dramatically YoY (OCF down roughly -49%, FCF down roughly -51%), which is the principal operational risk if the rate environment does not improve. The Berkshire stake is an important sentiment input but not a substitute for macro improvement.

Closing synthesis: timing matters more than thesis#

The investment case in D.R. Horton is straightforward: scale, land control and a conservative balance sheet create optionality and defensive attributes for a cyclical recovery. The company can navigate temporary margin compression and higher cancellations because leverage is low and cash is meaningful. That makes DHI an operationally resilient builder.

What remains binary is timing. If mortgage rates fall and affordability improves, DHI’s scale should translate into share gains and margin recovery. If rates stay elevated, the company will remain a profitable operator but will show choppy order trends, weaker cash conversion and increased reliance on incentives. Berkshire’s re‑entry is therefore best understood as a vote on timing (and optionality), not a blanket underwriting of immediate upside.

(Company financials and ratios cited above are taken from D.R. Horton FY filings and contemporaneous data filed on 2024‑11‑19 and subsequent corporate disclosures. Berkshire stake reporting is from media coverage cited earlier.)