Forestar Group (NYSE:FOR) reported first-quarter fiscal 2026 revenue growth and said it is maintaining its full-year guidance as the company balances a disciplined investment pace with what management described as affordability-driven headwinds for new home demand.
First-quarter results and margins
President and CEO Andy Oxley said the company delivered “a solid first quarter,” generating revenue of $273 million, up 9% from the prior-year quarter, on 1,944 lots sold. Net income was $15.4 million, or $0.30 per diluted share, compared with $16.5 million, or $0.32 per diluted share, a year earlier. Pre-tax income was $20.8 million versus $21.9 million in the prior-year quarter, and pre-tax margin was 7.6% compared with 8.7%.
During the Q&A, management pointed to mix as the primary driver of quarterly margin variability. The company said lots delivered in the quarter carried lower margins due to project mix, and it expects gross margins to remain within its historical range of roughly 21% to 23%, “probably at the lower end of that range” as it balances price and pace in a slower demand environment.
Pricing, lot deliveries, and customer cadence
Forestar sold 1,944 lots at an average sales price of $121,000. Allen said the average sales price was influenced by an “outsized mix” of deliveries from communities with higher price-point lots, and he cautioned that average sales price can fluctuate quarter to quarter based on geography and lot-size mix.
In response to an analyst question about whether the higher average sales price was planned, management said it was. The company cited growth in its development platform in the West, which tends to have higher average selling prices, and said that dynamic contributed to first-quarter results. Management added that it does not expect the same degree of impact in the remaining quarters of fiscal 2026, noting the first-quarter effect was amplified by lower overall lot-closing volume.
Forestar also discussed how homebuilder purchasing patterns have evolved. Management said the industry has shifted away from the “large bulk takedowns” seen in the post-COVID period toward more structured quarterly takedowns. The company said much of that transition occurred during fiscal 2025, with only a few remaining “pockets” still shifting. Management added it has not seen significant change on price broadly, though it may work with customers in communities where sales pace is slower.
Market conditions and operational outlook
Chief Operating Officer Mark Walker said demand for new homes continues to be pressured by affordability constraints and cautious consumer sentiment. He noted, however, that mortgage rate buy-down incentives offered by builders are helping bridge the affordability gap and support demand, particularly at more affordable price points.
Walker reiterated that Forestar’s “primary focus” remains developing lots for new homes targeting entry-level and first-time buyers, which he described as the largest segment of the new home market. On operations, he said contractor availability and materials remain solid, while development costs and cycle times have stabilized. He added that the company is using best management practices and working closely with trade partners to drive efficiency.
Asked about Texas and Florida—states where Forestar has “outsized exposure”—management said it evaluates markets monthly and quarterly and can reallocate capital across its national footprint. The company described Texas and Florida as “more challenged markets with inventory” and said it is being selective and moderating development activity where appropriate to avoid excess inventory, while still viewing long-term fundamentals such as in-migration as supportive.
D.R. Horton relationship and lot position
Allen emphasized D.R. Horton as Forestar’s largest customer, saying 16% of the homes D.R. Horton started in the past 12 months were on a Forestar-developed lot and 23% of D.R. Horton’s finished lot purchases over the same period were developed by Forestar. With what management described as a mutually stated goal of one out of every three D.R. Horton homes sold being on a Forestar lot, Forestar said it sees a significant opportunity to expand share with its largest customer.
Forestar said it is also working to expand relationships with other builders. Management reported that 16% of first-quarter deliveries—317 lots—went to other customers, including 146 lots sold to a lot banker that expects to sell those lots to D.R. Horton at a future date. The company also sold lots to six other homebuilders during the quarter.
Walker provided an update on the company’s lot position as of December 31, reporting:
- Total lot position: 101,000 lots
- Owned: 65,600 lots (65%)
- Controlled through purchase contracts: 35,400 lots (35%)
- Finished owned lots: 10,400, with the majority under contract to sell
The company said it targets owning a three- to four-year supply of land and lots and manages development phases to match deliveries with market demand. At quarter-end, Forestar said 24,100 owned lots (37%) were under contract to sell, secured by $210 million of hard earnest money deposits and expected to generate approximately $2.2 billion of future revenue. Another 28% of owned lots were subject to a right of first offer to D.R. Horton under executed purchase and sale agreements.
Investment pace, liquidity, and fiscal 2026 guidance
Management said it is balancing inventory investment with liquidity and flexibility. Forestar invested $415 million in land and land development during the quarter, with approximately 75% allocated to development and 25% to land acquisition. While the company said it has moderated land acquisition investment over the last 12 months, it described its approach as disciplined, flexible, and opportunistic. Forestar reiterated it still expects to invest about $1.4 billion in land acquisition and development in fiscal 2026, subject to market conditions.
Forestar ended the quarter with approximately $820 million of liquidity, including $212 million of unrestricted cash and $608 million of undrawn capacity on its revolving credit facility. Total debt was $793 million, with no senior note maturities in the next 12 months, and net debt-to-capital was 24.6%. Stockholders’ equity was $1.8 billion, and book value per share increased 10% from a year ago to $35.10.
Oxley said the company is maintaining its fiscal 2026 guidance for revenue of $1.6 billion to $1.7 billion and lot deliveries of 14,000 to 15,000 lots. While expecting affordability constraints and cautious consumers to remain near-term headwinds, management expressed confidence in long-term demand for finished lots, citing a constrained finished-lot supply in much of its national footprint and the company’s ability to gain market share in a fragmented lot development industry.
About Forestar Group (NYSE:FOR)
Forestar Group Inc, headquartered in Austin, Texas, is a residential lot development and management company focused on delivering finished home sites to homebuilders across the United States. The company acquires, entitles and develops land for single-family and multi-family housing, managing zoning, infrastructure and environmental approvals to prepare lots for construction. Forestar’s integrated approach to land development spans from initial site acquisition through final lot delivery, providing homebuilders with ready-to-build parcels in a variety of markets.
In addition to lot development, Forestar operates a retail homebuilding segment through joint ventures and strategic partnerships with national and regional homebuilders.
