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FG

Forestar Group Inc. (FOR)·Q3 2025 Earnings Summary

Executive Summary

  • Mixed quarter: revenue beat but EPS missed. Q3 2025 revenue was $390.5M vs S&P Global consensus $384.7M* (beat), while diluted EPS was $0.65 vs $0.713* (miss). EBITDA also missed ($43.1M* vs $53.0M*). Gross margin was 20.4%, down YoY on mix and a low-margin community closeout . Values retrieved from S&P Global.*
  • Guidance: FY25 lot delivery guidance was trimmed again to 14,500–15,000 (from 15,000–15,500 in Q2 and 16,000–16,500 in Q1), but revenue guidance was maintained at $1.50–$1.55B, implying higher ASP/mix resilience .
  • Demand/operations: Lots sold rose 11% YoY to 3,605 and 6% QoQ; owned lots under contract reached 25,700 (38% of owned), representing ~$2.3B of future revenue, described as the highest contracted backlog in five years .
  • Balance sheet/liquidity remain strong (total liquidity $792M; net debt-to-capital 28.9%), supporting share gains as competitors face tighter project-level financing; dual listing on NYSE Texas adds visibility in a key state footprint .

What Went Well and What Went Wrong

What Went Well

  • Revenue growth and volumes: Revenue +23% YoY to $390.5M; lots sold +11% YoY to 3,605; QoQ deliveries +6% .
  • Contracted backlog/visibility: Owned lots under contract 25,700 (38% of owned), ~$2.3B of future revenue; management called this the highest contracted backlog in five years, signaling demand resilience and visibility .
  • Liquidity and capital structure: $792M liquidity; net debt-to-capital 28.9%; management emphasized the advantage vs competitors reliant on costlier project-level loans .

What Went Wrong

  • Profitability/margins: Gross margin fell to 20.4% (22.5% YoY) due to mix and a low-margin community closeout; pre-tax margin 11.2% vs 16.2% YoY (14.6% YoY ex prior-year gain) .
  • EPS/EBITDA misses: EPS $0.65 vs $0.713*; EBITDA $43.1M* vs $53.0M*; SG&A rose with platform expansion (9.6% of revenue vs 9.2% YoY), limiting operating leverage . Values retrieved from S&P Global.*
  • Guidance cut on lots: FY25 lot deliveries lowered again to 14,500–15,000 on affordability/consumer confidence headwinds; although revenue guide held, investors may infer heavier mix/ASP dependence .

Financial Results

Headline P&L vs Prior Year, Prior Quarter, and Estimates

MetricQ3 2024 (YoY Comp)Q2 2025 (Prior Qtr)Q3 2025 ActualQ3 2025 Consensus*
Revenue ($M)$318.4 $351.0 $390.5 $384.7*
Diluted EPS ($)$0.76 $0.62 $0.65 $0.713*
Gross Margin (%)22.5% 22.6% 20.4% —
Pre-tax Income ($M)$51.6 $40.7 $43.6 —
EBITDA ($M)—$41.8*$43.1*$53.0*

Values retrieved from S&P Global.*

Revenue Breakdown (Q3)

Revenue Component ($M)Q3 2024Q3 2025
Residential lot sales – Development projects$295.7 $373.4
Residential lot sales – Lot banking$10.3 $10.9
(Increase)/Decrease in contract liabilities$(0.2) $(1.3)
Deferred development projects$0.5 $—
Tract sales and other$12.1 $7.5
Total Revenues$318.4 $390.5

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Lots sold (units)2,333 3,411 3,605
Avg sales price per lot ($)105,500 101,700 106,600
Owned lots (period-end)68,300 68,400 68,300
Controlled lots (period-end)37,700 37,500 34,000
Total owned + controlled (period-end)106,000 105,900 102,300
Owned lots under contract (units)25,200 25,400 25,700
Owned lots subject to ROFO to DHI (units)19,300 19,200 18,500
Owned lots fully developed (units)8,100 9,500 10,000
Liquidity ($M)644.5 792.0 792.0
Net debt / total capital (%)29.5% 29.8% 28.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Lot deliveries (units)FY 202516,000–16,500 (Q1) → 15,000–15,500 (Q2) 14,500–15,000 Lowered
Revenue ($B)FY 2025$1.60–$1.65 (Q1) → $1.50–$1.55 (Q2) $1.50–$1.55 Maintained (vs Q2)

Notes: Management reiterated revenue guide despite lowering lot deliveries, implying higher ASP/mix and/or community mix; management pointed to realized higher ASP to date and mix effects .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Affordability & demandBuilders’ rate buydowns aiding affordability; demand solid but cautious; slower spring start; Florida softer; Carolinas/Las Vegas stronger .Affordability constraints and weaker consumer confidence persist; still growing lots sold and backlog .Stable headwind, managed through pricing/pace.
Gross marginsStable long-term 21–23% normalized; Q2 at 22.6%; stability expected .Q3 at 20.4% due to mix and one low-margin closeout; normalized ~21.1% per CFO; sees no indication of reduced margins ahead .Slight downtick this quarter; normalization expected.
SG&A leverageHeadcount up to support new markets; SG&A high single digits expected for FY as leverage improves .SG&A 9.6% in Q3; continued platform build-out; efficient management focus .Gradual leverage improvement targeted.
D.R. Horton penetration15% of DHI starts on Forestar lots; goal 1-in-3; expanding other builders .15% of DHI starts; 23% of DHI finished lot buys in Q3 were Forestar; reiterates 1-in-3 goal .Opportunity intact; incremental progress.
Land development costs & cycle timesCosts stabilized; cycle times improving; government delays remain .Costs stable; availability of contractors/materials solid; continued improvement in cycle times .Stable to improving.
Pricing/ASP & mixQ1 ASP elevated due to mix; expect low-to-mid single-digit price increases .ASP impact from higher price point mix; revenue guide maintained despite lower lots .Mix-driven ASP tailwind continues.
Regulatory/tariffsToo early to judge deregulation impacts; limited tariff cost impact so far .No new updates provided in Q3 .Watching; neutral.

Management Commentary

  • “Lots sold increased 11% year-over-year... lots under contract to sale increased 26%... $2.3 billion of future revenue, which is the highest contracted backlog we have had during the last five years.” — CEO Andy Oxley .
  • “Our gross profit margin for the quarter was 20.4%... impacted by the closeout of one community... excluding the effect... approximately 21.1%... over the last three years... 21%–23% range.” — CFO Jim Allen .
  • “We are maintaining our previous revenue guidance of $1.50 billion to $1.55 billion,” while lowering lot deliveries to 14,500–15,000 on current market conditions. — Chairman Donald J. Tomnitz .
  • “We ended the quarter with $792 million of liquidity... net debt to capital 28.9%... capital structure is one of our biggest competitive advantages.” — CFO Jim Allen .

Q&A Highlights

  • Margin quality/run-rate: Management emphasized margins remain largely mix-driven; excluding one low-margin closeout, normalized margin ~21.1% and still within 21–23% long-term range .
  • Guidance mechanics: Revenue guide maintained despite lower lot deliveries due to higher realized ASP and mix; initial guidance assumed low single-digit ASP increase .
  • Geographic expansion: Boots on the ground in Pacific Northwest, Northern California, Salt Lake City, Reno; no new markets added in Q3 .
  • Customer mix/lot banker: 15% of deliveries sold to non-DHI customers (530 lots), including 331 to a lot banker (ultimately for DHI); similar pricing/returns as builder contracts .
  • REIT consideration: No interest in converting; Forestar is a developer, not a land banker .

Estimates Context

  • Q3 2025 vs consensus: Revenue beat ($390.5M vs $384.7M*), EPS missed ($0.65 vs $0.713*), EBITDA missed ($43.1M* vs $53.0M*). Four estimates for revenue and EPS underpin consensus . Values retrieved from S&P Global.*
  • Implications: Consensus EPS and EBITDA likely need downward revisions on mix/SG&A leverage, while revenue estimates may see minor upward bias given maintained guide and higher ASP/mix commentary .

Q3 Actual vs Consensus Detail

MetricQ3 2025 ActualQ3 2025 Consensus*Surprise
Revenue ($M)$390.5 $384.7*+$5.8M (beat)
Diluted EPS ($)$0.65 $0.713*-$0.063 (miss)
EBITDA ($M)$43.1*$53.0*-$9.9M (miss)

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue quality held up via mix: Despite affordability headwinds, revenues beat consensus and the FY revenue guide was maintained, supported by higher ASPs and community mix .
  • Profitability under pressure near term: Gross margin dipped on mix and a low-margin closeout; SG&A remained elevated with platform expansion, driving EPS/EBITDA misses .
  • Guidance signals cautious demand: Another reduction to FY lots (now 14,500–15,000) acknowledges affordability/consumer confidence drag, but maintaining revenue guidance implies pricing/mix strength and disciplined pacing .
  • Backlog and visibility reinforce share-gain story: 25,700 owned lots under contract (~$2.3B) and 10,000 fully developed owned lots position FOR to support D.R. Horton and broaden to other builders .
  • Balance sheet optionality: $792M liquidity and sub-30% net debt-to-capital offer flexibility to pursue opportunities as competitors face financing constraints; potential catalyst if market share within DHI approaches the 1-in-3 goal .
  • Estimate paths: Expect downward adjustments to EPS/EBITDA, stable-to-up revenue; monitor margin commentary normalization back toward 21–23% range as mix normalizes .
  • Event watch: Continued execution on new market ramps and any change in DHI pace/community count could be stock-moving; dual listing on NYSE Texas adds visibility in a strategic geography .

Appendix: Balance Sheet & Liquidity (Q3 2025)

  • Cash & equivalents: $189.2M; Debt: $872.8M; Liquidity: $792.0M; Net debt-to-capital: 28.9% .

Appendix: Additional Q3 2025 Press Release

  • Dual listing on NYSE Texas alongside NYSE primary listing; management underscores Texas commitment with >26,000 owned/controlled lots in state and 50 active communities .

Notes

  • Values marked with an asterisk (*) are from S&P Global consensus/actuals. Values retrieved from S&P Global.