Forestar Group (FOR) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $318.4 million on 3,255 lots delivered, with net income of $38.7 million ($0.76/share), down 17% year-over-year; for the nine months ended June 30, 2024, revenue rose 8% to $958.0 million and net income increased 29% to $121.8 million ($2.40/share).

• Book value per share increased 15% to $29.87, and return on equity expanded to 13.8% for the trailing twelve months.

• Forestar operates in 60 markets across 24 states, with strategic alignment to D.R. Horton, which owns 62% and accounted for 91% of lots sold and lot sales revenue in the nine months.

• Owned and controlled lots grew 40% year-over-year to 102,100, with 57,900 owned and 44,200 controlled via contracts.

• Management continues to focus on disciplined capital allocation, land investment, and maximizing returns.

Financial highlights

• Q3 pre-tax income was $51.6 million (16.2% margin), down 17% year-over-year; nine-month pre-tax income rose 28% to $161.6 million.

• Gross profit margin for Q3 was 22.5%, and for the nine months was approximately 23.7%.

• SG&A expense for Q3 was $29.3 million (9.2% of revenue); for the nine months, SG&A was $86.5 million (9.0% of revenue).

• Adjusted EBITDA for Q3 was $50.3 million, with a margin of 15.8%.

• Net debt to capital ratio was 18.7% at quarter-end, with total liquidity of $744–$745 million, including $359–$360 million in cash and $385 million in undrawn credit.

Outlook and guidance

• Fiscal 2024 lot deliveries expected between 14,600 and 15,100, with revenue guidance maintained at $1.4–$1.5 billion.

• Lot deliveries projected to grow 4% to 8% in fiscal 2024, with potential for double-digit growth in 2025 depending on market conditions.

• Plans to invest approximately $1.6 billion in land acquisition and development in fiscal 2024.

• Targeting a 3- to 4-year owned inventory of lots to support future growth.

• Management expects continued strong demand for affordable residential lots, supported by favorable demographics and limited housing supply.