Key Highlights

  • Diluted EPS of USD 1.15 fell short of the consensus estimate of USD 1.25 and USD 1.70 a year earlier.
  • Revenue of USD 580.8 million declined 13% and trailed the consensus estimate of USD 603.09 million, on 5,004 lots sold.
  • Gross profit margin fell to 17.8% from 22.3%, or 20.8% excluding project close-out costs and Impairment charges.
  • The fiscal 2027 outlook calls for 12,000 to 13,000 lots and USD 1.4 billion to USD 1.5 billion of revenue.

Forestar Group Inc. (NYSE:FOR) reported fiscal fourth quarter 2026 Net Income attributable to the company of USD 59.2 million, or USD 1.15 per diluted share, below the consensus estimate of USD 1.25 and down from USD 1.70 a year earlier. Revenue of USD 580.8 million fell 13% from USD 670.5 million and landed below the consensus estimate of USD 603.09 million. Pre-tax income decreased 31% to USD 78.6 million, a pre-tax margin of 13.5%.

Lots sold rose 2% to 5,004, but the average sales price per lot dropped to USD 108,300 from USD 115,700, and tract sales and other revenue fell to USD 38.7 million from USD 103.4 million. For the full fiscal year, net income was USD 142.6 million, or USD 2.78 per diluted share, versus USD 3.29, on revenue of USD 1.64 billion.

Margin Pressure and Customer Mix

Gross profit margin was 17.8% against 22.3%. The chief financial officer tied the decline to higher costs to close out one project because of added regulatory compliance requirements and to USD 7.6 million of real estate impairment charges on two projects. Excluding those items, margin would have been 20.8%. A USD 10.0 million gain on sale of Assets partly offset the pressure, and selling, general and administrative expense fell 10% to USD 38.4 million, or 6.6% of revenue.

D.R. Horton remains the largest customer, with 14% of its fiscal 2026 home starts on Forestar lots, against a stated goal of one in three. Of 13,545 lots sold in the year, 1,916 went to other builders, including eight new customers, the highest share of annual lot sales since 2018 excluding lots sold to a lot banker.

Outlook and Balance Sheet

For fiscal 2027 the company projects 12,000 to 13,000 lots delivered and revenue of USD 1.4 billion to USD 1.5 billion, with land Acquisition and development Investment of about USD 1.3 billion and relatively flat headcount. Management cited affordability constraints, cautious consumer sentiment and rising Mortgage rates as pressures on new home demand, with homebuilders shortening cycle times and managing finished lot inventory.

Liquidity totaled USD 1.3 billion, made up of USD 657.0 million of cash and USD 657.8 million of revolver capacity. Debt was USD 794.2 million with no senior note maturities until fiscal 2028, and net debt to total Capital was 6.7%. Book Value per share rose 8% to USD 37.56, and Return on Equity for the year was 7.8%. CEO Anthony Oxley also noted the executive chairman retires effective October 31.

Contracted Lots and Dates to Follow

The lot position offers several markers. Owned and controlled lots total 84,400, of which 58,200 are owned and 8,100 are fully developed. Another 21,500 owned lots, or 37%, are under contract, representing about USD 2.2 billion of future revenue backed by roughly USD 200 million of earnest money.

A further 18,600 lots are subject to a right of first offer to D.R. Horton. The first quarter results are scheduled for January 19, 2027. Other reference points are the 12,000 to 13,000 lot outlook, the 20.8% adjusted gross margin and the 15% minimum pre-tax return required for new projects.