Forestar Group Inc.

What they do

Forestar operates through a single real estate segment, acquiring land and developing finished single-family residential lots sold primarily to local, regional and national homebuilders. It focuses on entitled, short-duration projects developed in phases, and also makes short-term lot banking and land banking investments. Operations span 65 markets in 24 states as of June 30, 2026.

Revenue drivers

• Residential lot sales — The core business: finished single-family lots sold to homebuilders, with 8,541 lots sold in the nine months ended June 30, 2026 at an average price of $113,000. This is the substantial majority of consolidated revenue.
• Tract sales and other revenues — Occasional sales of larger tracts and other real estate revenue supplement lot sales and contributed to the 6% consolidated revenue increase in the first nine months of fiscal 2026.
• D.R. Horton relationship — D.R. Horton owned approximately 62% of Forestar as of June 30, 2026 and is the dominant customer; under a Master Supply Agreement Forestar supplies finished lots to D.R. Horton at market terms.
• Lot banking and land banking — Short-term strategic investments in finished lots and undeveloped land intended to be sold within a short period to deploy capital prior to longer-term development projects.

Recent performance

For the quarter ended June 30, 2026, net income attributable to Forestar rose 9% to $35.9 million, or $0.70 per diluted share, and pre-tax income rose 12% to $48.7 million on revenues of $407.0 million, up 4%. For the nine months ended June 30, 2026, revenues increased 6% to $1,054.3 million and net income rose 3% to $83.5 million, or $1.63 per diluted share. Lots sold in the nine-month period declined 9% to 8,541 while average sales price per lot rose 8% to $113,000. Full fiscal 2025 revenue was $1.66 billion with net income of $167.9 million.

Strategy

Forestar focuses on entitled, short-duration lot development projects that can be developed in phases to match market demand and maximize capital efficiency. The company has expanded to 65 markets in 24 states, citing geographic diversification as a way to reduce operational risk and consolidate share in a fragmented industry. It generally secures entitlements while land is under contract, aiming to have entitlements in place before closing. It plans to keep developing lots at affordable price points and may pursue multifamily sites when opportunities arise.

Risks

• D.R. Horton control — D.R. Horton owns approximately 62% of Forestar and can control stockholder votes, and so long as it holds 35% or more, Forestar may not take certain actions without its approval, including certain equity issuances, indebtedness and acquisitions.
• Customer concentration — D.R. Horton is the dominant customer, and lots sold to other customers fell to 289 in the third quarter of fiscal 2026 from 530 in the prior year quarter, making results highly dependent on one buyer.
• Affordability and demand — Management cited ongoing affordability constraints and cautious consumer sentiment, with homebuilders offering elevated sales incentives such as mortgage interest rate buydowns to spur demand for new homes.
• Land and development execution — The business depends on acquiring entitled land, securing entitlements, and completing infrastructure on schedule across 65 markets in 24 states, where local and regional economic cycles can affect demand and pricing.

Outlook

Management characterized third quarter results as solid, with revenues up 4% and pre-tax income up 12%, and noted liquidity of $1.1 billion reflecting disciplined capital management amid affordability constraints. The company continues to focus on developing lots at affordable price points. No specific numerical guidance was given in the provided excerpts.