Fixed upstream
master:
https://fedorahosted.org/freeipa/changeset/f2fe35721967531257bc952b766a7c77e71be826
ipa-4-3:
https://fedorahosted.org/freeipa/changeset/27534f8d7294536364147b18b76ecb2bac67870f

IPA-server version: ipa-server-4.4.0-12.el7.x86_64
---------------------

Verified the bug on the basis of following observations:
1. Verified that after stoping "named-pkcs11" using "downloadonly" option updates are downloaded successfully. 
# systemctl stop named-pkcs11

# ipactl status
Directory Service: RUNNING
krb5kdc Service: RUNNING
kadmin Service: RUNNING
named Service: STOPPED
ipa_memcached Service: RUNNING
httpd Service: RUNNING
pki-tomcatd Service: RUNNING
ipa-otpd Service: RUNNING
ipa-dnskeysyncd Service: RUNNING
ipa: INFO: The ipactl command was successful

# yum --downloadonly update 'ipa*' sssd

2. Noticed that on running update again , following message is observed at console

# yum -y update 'ipa*' sssd

  Cleanup    : libini_config-1.2.0-25.el7.x86_64                                                               141/141 
DNS query for vm-idm-016.testrelm.test. A failed: The DNS operation timed out after 30.0005340576 seconds
Skipping update of global DNS forwarder in LDAP: Unable to determine if local server is using an IP address belonging to an automatic empty zone. Consider changing forwarding policy to "only". DNS exception: The DNS operation timed out after 30.0005340576 seconds
  Verifying  : sssd-1.14.0-42.el7.x86_64                                                                         1/141 

3. Verified that ipa-server install task was run successfully within ipaupgrade.log and also the ipa-server package was updated.

# tail -10 /var/log/ipaupgrade.log 
2016-09-19T13:33:38Z DEBUG response status 200
2016-09-19T13:33:38Z DEBUG response headers {'date': 'Mon, 19 Sep 2016 13:33:38 GMT', 'content-length': '168', 'content-type': 'application/xml', 'server': 'Apache-Coyote/1.1'}
2016-09-19T13:33:38Z DEBUG response body '<?xml version="1.0" encoding="UTF-8" standalone="no"?><XMLResponse><State>1</State><Type>CA</Type><Status>running</Status><Version>10.3.3-10.el7</Version></XMLResponse>'
2016-09-19T13:33:38Z DEBUG Starting external process
2016-09-19T13:33:38Z DEBUG args=/bin/systemctl stop pki-tomcatd
2016-09-19T13:33:39Z DEBUG Process finished, return code=0
2016-09-19T13:33:39Z DEBUG stdout=
2016-09-19T13:33:39Z DEBUG stderr=
2016-09-19T13:33:39Z INFO The IPA services were upgraded
2016-09-19T13:33:39Z INFO The ipa-server-upgrade command was successful

# rpm -q ipa-server
ipa-server-4.4.0-12.el7.x86_64

# kinit admin
Password for admin: 

# cat /var/log/ipaupgrade.log | grep "DNS operation"
2016-09-19T13:32:07Z ERROR DNS query for vm-idm-016.testrelm.test. A failed: The DNS operation timed out after 30.0005340576 seconds
2016-09-19T13:32:07Z ERROR Skipping update of global DNS forwarder in LDAP: Unable to determine if local server is using an IP address belonging to an automatic empty zone. Consider changing forwarding policy to "only". DNS exception: The DNS operation timed out after 30.0005340576 seconds

# ipactl restart
Stopping pki-tomcatd Service
Restarting Directory Service
Restarting krb5kdc Service
Restarting kadmin Service
Restarting named Service
Restarting ipa_memcached Service
Restarting httpd Service
Restarting ipa-custodia Service
Restarting ntpd Service
Restarting pki-tomcatd Service
Restarting ipa-otpd Service
Restarting ipa-dnskeysyncd Service
ipa: INFO: The ipactl command was successful

# ipactl status
Directory Service: RUNNING
krb5kdc Service: RUNNING
kadmin Service: RUNNING
named Service: RUNNING
ipa_memcached Service: RUNNING
httpd Service: RUNNING
ipa-custodia Service: RUNNING
ntpd Service: RUNNING
pki-tomcatd Service: RUNNING
ipa-otpd Service: RUNNING
ipa-dnskeysyncd Service: RUNNING
ipa: INFO: The ipactl command was successful

Thus on the basis of above observations, marking the status of bug to "VERIFIED".

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://rhn.redhat.com/errata/RHBA-2016-2404.html