Bank CEOs meet with Trump to discuss Fannie Mae and Freddie Mac - Bloomberg
Investing.com -- On February 18, 2025, Moody’s (NYSE:MCO) Ratings upgraded the senior unsecured notes ratings of D.R. Horton, Inc. (Horton) to A3 from Baa1. Alongside this, the company’s outlook has been revised from positive to stable.
The upgrade is a reflection of Horton’s consistent strong operational performance, its large scale and robust national market position. The company’s diverse product offerings, depth of reach within its markets, and ability to gain market share also contributed to the upgrade. Horton’s decision to maintain a conservative consolidated leverage target of 20%, the most conservative in the sector, further supports its financial flexibility and readiness to withstand industry downturns.
Moody’s Vice President and Senior Credit Officer, Natalia Gluschuk, stated that the upgrade to A3 also signifies the resilience of Horton’s business model and operations during both strong sector cycles and downturns. She also highlighted the company’s commitment to maintaining its credit profile strength and excellent liquidity at all times.
The A3 rating is backed by Horton’s strong balance sheet, a track record of low debt to book capitalization leverage, and conservative financial strategy through various industry cycles. The company’s leading market share by revenue and homes closed, robust cash flow generation, and strong liquidity position also played a part in the rating upgrade. Horton’s strong positioning in the affordable category of first-time and entry-level homes, with about 70% of deliveries priced below $400,000, was another factor in the rating upgrade.
However, the rating is limited by the company’s engagement in speculative construction, its shareholder-friendly activities, and risks associated with the development of its ancillary businesses. Potential volatility in results stemming from the investment in Forestar due to its land development business, and the cyclicality of the US homebuilding industry also constrain the rating.
The stable outlook reflects Moody’s expectation that Horton will continue to generate strong results, gain market share, and operate in line with its conservative leverage and liquidity targets.
Moody’s also revised Horton’s governance profile score (IPS) to G-1 from G-2, indicating a strong financial policy and commitment to operating with a conservative level of leverage during any industry cycle.
The rating could be upgraded further if Horton shows a track record of operating with strong credit metrics, while adhering to a conservative leverage profile. The rating could be downgraded if Horton’s commitment to maintaining a conservative financial policy and leverage target weakens.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.