10-Q · April 23, 2026
Forestar reported Q2 revenue of $374.3 million (up 7% YoY from $351.0 million) and income before income taxes of $43.9 million; diluted EPS was $0.63. Lot volume declined (2,938 lots sold in Q2 vs. 3,411 prior-year)…
Earnings analysis · 10-Q
FOR earnings analysis
Filed July 22, 2026 · Our reading of the company's report
The latest report
Forestar delivered modest third-quarter growth, with revenue of $407.0 million (+4% year over year) and diluted EPS of $0.70, while gross margin improved to 20.7%. Cash conversion improved sharply on a nine-month basis…
Read full summary
Forestar delivered modest third-quarter growth, with revenue of $407.0 million (+4% year over year) and diluted EPS of $0.70, while gross margin improved to 20.7%. Cash conversion improved sharply on a nine-month basis and liquidity remains strong, supported by $394.9 million of cash and $669.9 million of revolver availability. Offsetting these positives, year-to-date lot volume declined 9%, non-D.R. Horton sales fell materially in the quarter, and management continues to cite affordability, cautious consumers, elevated costs, and approval delays as operating headwinds.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Reported figures
- Earnings per share
- $0.7
- Segment
- Real estate (sole reportable segment): $407.0 million of total revenue, including $397.4 million of residential lot sales and $9.6 million of tract sales and other revenue.
What stood out
-
Revenue and EPS increased
Third-quarter revenue rose $16.5 million, or 4%, year over year to $407.0 million from $390.5 million, and was $33.0 million above the prior quarter's $374.0 million. Diluted EPS was $0.70, up from $0.65 a year earlier and $0.63 in the preceding quarter.
-
Margins improved versus prior year
Gross margin was 20.7% in the quarter, calculated from $407.0 million of revenue and $322.9 million of cost of sales, versus 20.4% a year ago and 20.2% in the prior quarter. Pre-tax income increased 12% to $48.7 million from $43.6 million, implying a 12.0% pre-tax margin versus 11.2%.
-
D.R. Horton volume and pricing rose
Lot deliveries to D.R. Horton increased to 3,370 lots from 3,075 lots, while related revenue rose to $361.1 million from $325.0 million. Total residential lot volume increased to 3,659 lots from 3,605 lots and average lot price increased to $108,800 from $106,600.
-
Operating cash flow swung positive
Nine-month operating cash flow turned positive at $27.6 million, compared with cash used in operations of $454.0 million in the prior-year period. Net investing cash use was only $0.3 million; conventional capex is not separately disclosed because land development investment is principally reflected in operating cash flow.
-
Liquidity and leverage strengthened
Liquidity was substantial at $394.9 million of cash plus $669.9 million of unused revolver capacity at June 30, 2026. The company had no revolver borrowings, and net debt-to-total-capital improved to 17.7% from 19.3% at September 30, 2025.
-
Large contracted lot backlog
The contracted lot backlog remained sizable: 23,500 owned lots were under contract for an aggregate remaining sales price of about $2.3 billion. Total owned and controlled lot position was 91,700 lots.
What to watch
-
Affordability pressure reduced year-to-date volume
Affordability constraints and cautious consumers remain the key demand headwind. For the first nine months, total lots sold fell 9% to 8,541 from 9,349, with the 8% increase in average price to $113,000 only partially offsetting the volume decline.
-
Customer concentration and non-D.R. sales decline
Sales concentration and third-party demand weakened: D.R. Horton represented $361.1 million of the quarter's $398.0 million of gross residential lot sales, while revenue from other customers declined to $36.9 million from $59.3 million. D.R. Horton also owned approximately 62% of Forestar at June 30, 2026.
-
Development timing and land write-offs increased
Development-cycle and investment risks persist as municipal approvals continue to extend cycle times and development costs remain elevated. Land-contract deposit and pre-acquisition write-offs were $8.0 million for the nine months, versus $3.9 million a year earlier.
-
Debt and facility maturity exposure
Near-term refinancing exposure is limited but not absent: $65 million of the $715 million revolver commitment matures on October 28, 2026, while the company has $300 million of 5.0% senior notes due in March 2028.
Management's outlook
The 10-Q does not provide explicit quantitative fiscal-year revenue, lot-delivery, or EPS guidance. Management states it expects seasonally greater lot deliveries, revenue, and pre-tax income in the fourth fiscal quarter, but does not quantify the outlook in this filing.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.