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    FOR
    Earnings call· Jun 2026(Q3 FY26)

    Forestar Group Inc. FOR

    Jul 21, 2026 Source

    Executive summary

    Forestar Group Inc. Q3 FY26 — Solid Results with Strong Liquidity and Maintained Guidance

    Forestar delivered solid third-quarter results, marked by increased revenues and profits, while maintaining a strong balance sheet and significant liquidity. Despite ongoing affordability constraints and cautious consumer sentiment impacting new home sales, the company is managing inventory investments with discipline and remains focused on efficient land and lot turnover. Management reiterated full-year guidance, confident in its ability to navigate market conditions and expand market share in the fragmented lot development industry.

    Highlights

    5

    • Revenues increased 4% to $407 million.

    • Diluted EPS increased 8% to $0.70.

    • Pretax income increased 12% to $48.7 million.

    • Book value per share increased 10% from a year ago to $36.40.

    • Strong liquidity of $1.1 billion, including $395 million cash and $670 million available revolver capacity.

    Concerns

    3

    • Ongoing affordability constraints and cautious consumer sentiment continue to impact the pace of new home sales.

    • Gross profit margin at 20.7% was at the lower end of the historical 21%-23% range due to mix and slower absorption.

    • Municipalities continue to be a bottleneck for reducing development cycle times.

    Guidance & targets

    5
    CategoryTargetConfidence
    Fiscal 2026 Lot Delivery
    14,000 to 14,500 lots
    high materiality
    High
    Fiscal 2026 Revenue
    $1.6 billion to $1.7 billion
    high materiality
    High
    Headcount
    remain relatively flat
    medium materiality
    Medium
    Fiscal 2026 Land Acquisition and Development Investment
    approximately $1.4 billion
    high materiality
    Medium
    Owned Lot Supply Target
    3- to 4-year supply
    medium materiality
    High

    Operational metrics

    23
    Net income attributable to Forestar
    $35.9 millionup 9% YoY
    Q3 FY26

    Compared to $32.9 million in the prior year quarter.

    Diluted EPS
    $0.70up 8% YoY
    Q3 FY26

    Compared to $0.65 in the prior year quarter.

    Pretax income
    $48.7 millionincreased 12% YoY
    Q3 FY26

    Compared to $43.6 million in the prior year quarter.

    Pretax profit margin
    12%up 80 bps YoY
    Q3 FY26

    From 11.2% in the prior year quarter.

    Revenues
    $407 millionincreased 4% YoY
    Q3 FY26

    Compared to $390.5 million in the prior year quarter.

    Lots sold
    3,659
    Q3 FY26

    null

    Average sales price per lot
    $108,800
    Q3 FY26

    Expect continued quarterly fluctuations based on geographic and lot size mix.

    Gross profit margin
    20.7%up from 20.4% YoY
    Q3 FY26

    Lower end of historical 21%-23% range due to mix and slower absorption.

    SG&A expense
    $38.3 millionincreased 2% YoY
    Q3 FY26

    Compared to $37.4 million in the prior year quarter.

    SG&A as percentage of revenues
    9.4%down from 9.6% YoY
    Q3 FY26

    null

    D.R. Horton lot penetration
    14%
    past 12 months

    Of homes D.R. Horton started. Mutually stated goal is 1 out of every 3 homes (33%).

    Lots sold to other customers
    289
    Q3 FY26

    Represents 8% of Q3 deliveries to 12 other customers.

    Total liquidity
    $1.1 billion
    Q3 FY26

    Includes cash and revolver capacity.

    Unrestricted cash balance
    $395 million
    Q3 FY26

    Part of total liquidity.

    Available capacity on undrawn revolving credit facility
    $670 million
    Q3 FY26

    Part of total liquidity.

    Total debt
    $793.8 million
    Q3 FY26

    No senior note maturities in the next 12 months.

    Net debt-to-capital ratio
    17.7%
    Q3 FY26

    null

    Stockholders' equity
    $1.9 billion
    Q3 FY26

    null

    Book value per share
    $36.40increased 10% YoY
    Q3 FY26

    null

    Investment in land and land development
    $312 million
    Q3 FY26

    Moderated land acquisition investment over the last year.

    Underwriting criteria - pretax return on average inventory
    15%
    ongoing

    Minimum target for new development projects.

    Underwriting criteria - return of initial cash investment
    within 36 months
    ongoing

    Target for new development projects.

    Cycle times
    12 monthsdown from 36 months
    current

    Settled around 12 months, with further opportunities for efficiencies.

    Orderbook & backlog

    8
    Contracted Backlog (future revenue)$2.3 billionQ3 FY26

    Visibility towards $2.3 billion of future revenue.

    Total Lot Position91,700 lotsJune 30

    Comprised of 62,200 owned lots and 29,500 controlled lots.

    Owned Lots62,200 lotsJune 30

    68% of total lot position.

    Controlled Lots (through purchase contracts)29,500 lotsJune 30

    32% of total lot position.

    Finished Owned Lots9,600 lotsquarter end

    Majority are under contract to sell.

    Owned Lots Under Contract to Sell23,500 lotsquarter end

    38% of owned lots, secured by $202 million of earnest money deposits.

    Earnest Money Deposits$202 millionquarter end

    Secures contracts for $2.3 billion of future revenue.

    Owned Lots Subject to Right of First Offer (D.R. Horton)31% of owned lotsquarter end

    Based on executed purchase and sale agreements.

    Risks & headwinds

    3
    Ongoing affordability constraints and cautious consumer sentimentnear-term

    impact the pace of new home sales

    Mitigation: Managing inventory investments with discipline and flexibility; balancing pace and price of lot sales; strong balance sheet and operational expertise.

    Municipalities as a bottleneck for development cycle timesongoing

    bottleneck to reduce our cycle times further

    Mitigation: Opportunities to reduce cycle times in the future.

    Slower absorption environment and mix impact on gross marginsQ3 FY26 and last 3 or 4 years

    Gross profit margin at 20.7%, lower end of historical 21%-23% range.

    Mitigation: Managing price and pace on a project-by-project basis.

    What to watch in Q4 FY26

    4

    Headcount growth for FY27

    FY27
    Currentrelatively flat, slightly down this year
    Targetincrease in headcount as we go into '27

    Why it matters

    Indicates company's investment in future land development capabilities and growth, particularly in new regions.

    We will see an increase in headcount as we go into '27 as we develop out more land capabilities, particularly out West.

    Q&A highlights

    6

    How is competition and land pricing evolving given the slower homebuyer market?

    The land market has been relatively stable with no significant change in land prices. Forestar has seen some improvement in negotiating terms, such as takedowns and focusing on shovel-ready deals. Overall, there's less development activity, but most markets are still slightly undersupplied in finished lots, creating future growth opportunities.

    “Landmark has been relatively stable. I haven't seen much change in land price. We have seen a little bit of improvement on being able to negotiate terms, for example, getting land on takedowns, getting through full entitlement and permitting -- so we're able to focus on shovel-ready deals.”

    asked by Ryan Gilbert · answered by Anthony Oxley

    2 min read6 chapters

    Detailed Narrative

    01

    Market Conditions and Strategy

    Forestar is navigating ongoing affordability constraints and cautious consumer sentiment impacting new home sales. In response, the company is managing inventory investments with discipline and flexibility, focusing on turning land and lot inventory efficiently, maximizing returns, and consolidating market share. The company's strong balance sheet and operational expertise position it to navigate current market conditions.

    02

    D.R. Horton Relationship

    D.R. Horton remains Forestar's largest and most important customer. 14% of homes started by D.R. Horton in the past 12 months were on Forestar-developed lots. The mutually stated goal is for 1 out of every 3 D.R. Horton homes to be on a Forestar lot, indicating significant growth opportunity. Forestar also sold 8% of Q3 deliveries (289 lots) to 12 other customers, expanding its builder relationships.

    03

    Capital Structure and Liquidity

    Forestar ended the quarter with $1.1 billion of liquidity, including $395 million in unrestricted cash and $670 million in available revolving credit facility capacity. Its net debt-to-capital ratio was 17.7%, with no senior note maturities in the next 12 months. This strong capital structure provides operational flexibility and a competitive advantage over developers relying on more restrictive project-level financing.

    04

    Land Market Dynamics

    The land market has been relatively stable with little change in land prices. Forestar has seen some improvement in negotiating terms, such as takedowns and focusing on shovel-ready deals. While there is somewhat less development activity across the board, most markets are still slightly undersupplied in finished lots, presenting future growth opportunities for the company.

    05

    Operational Efficiencies and Costs

    The company achieved a significant milestone, delivering its 100,000th lot since D.R. Horton's investment in 2017. Cycle times have stabilized around 12 months, down from 36 months, with further opportunities for reduction, though municipalities remain a bottleneck. Horizontal construction costs have stabilized over the past 12 months, with some reductions offset by increases in other categories, resulting in stable direct costs.

    06

    Future Growth and Market Share

    Forestar is well-positioned for future growth, aiming to expand its market share within the D.R. Horton footprint and with third-party builders. The company has a robust pipeline of future projects and expects to increase headcount in 2027 to develop more land capabilities, particularly out West, supporting its long-term strategic and operational plans.

    AI-generated summary of the company’s earnings call. Not investment advice.