Forestar Reports Fiscal 2024 Third Quarter Results
Forestar Group Inc. (NYSE: FOR) reported its fiscal 2024 third quarter results. Net income decreased 17% to $38.7 million, or $0.76 per diluted share. Revenues decreased 14% to $318.4 million. The company sold 3,255 lots, a 15% decrease from the previous year. However, for the nine months ended June 30, 2024, net income increased 29% to $121.8 million, and revenues increased 8% to $958.0 million.
Forestar's lot position increased 40% to 102,100 lots. The company's return on equity expanded 190 basis points to 13.8%. Forestar ended the quarter with $744.4 million in total liquidity and a net debt to total capital ratio of 18.7%. For fiscal 2024, Forestar now expects to deliver between 14,600 and 15,100 lots, generating $1.4 billion to $1.5 billion in revenue.
- Net income for the nine months ended June 30, 2024 increased 29% to $121.8 million
- Revenues for the first nine months of fiscal 2024 increased 8% to $958.0 million
- Return on equity expanded 190 basis points to 13.8%
- Lot position increased 40% to 102,100 lots
- Strong liquidity position with $744.4 million in total liquidity
- Low net debt to total capital ratio of 18.7%
- Quarterly net income decreased 17% to $38.7 million
- Quarterly revenues decreased 14% to $318.4 million
- Lots sold during the third quarter decreased 15% to 3,255 lots
- Slight downward revision in expected lot deliveries for fiscal 2024
Insights
The recent financial results reveal a mix of positive and negative indicators for Forestar Group Inc. Despite a decrease in net income and pre-tax income for the third quarter—down
One key positive is the increase in return on equity (ROE) to
However, the decrease in lots sold during Q3, including a
Short-term investors should be cautious due to the quarterly declines in income and revenues, but long-term investors might find the increased lot ownership and improved ROE encouraging for future growth.
Forestar's market position in the residential lot development sector appears strong, especially given the 40% increase in owned and controlled lots to 102,100. This strategic expansion could provide long-term growth opportunities, particularly as the supply of vacant developed lots remains constrained. This competitive advantage is reinforced by the significant backlog of $1.8 billion in future revenue from contracted lots, which provides a stable foundation for upcoming quarters.
Moreover, Forestar's low net debt to total capital ratio of
The positive outlook shared by the company’s Chairman, expecting to deliver between 14,600 and 15,100 lots for the fiscal year, aligns with the broader industry trend of high demand for affordable lots. Investors should note that this projection is slightly lower than the upper range of prior guidance, indicating cautious optimism in an uncertain market environment.
Overall, the combination of market positioning, liquidity and backlog supports a positive view for long-term investors, but the immediate concerns over revenue and income declines may cause some short-term volatility.
Fiscal 2024 Third Quarter Highlights
All comparisons are year-over-year
-
Net income of
$38.7 million $0.76 -
Pre-tax income of
$51.6 million 16.2% -
Consolidated revenues of
$318.4 million -
Owned and controlled lots increased
40% to 102,100 lots -
Return on equity expanded 190 basis points to
13.8% for the trailing twelve months ended June 30, 2024 -
Book value per share increased
15% to$29.87 -
Net debt to total capital ratio of
18.7%
Financial Results
Net income for the third quarter of fiscal 2024 decreased
For the nine months ended June 30, 2024 net income increased
The Company’s return on equity was
Operational Results
Lots sold during the third quarter decreased
Lots sold during the nine months ended June 30, 2024 increased
The Company’s lot position at June 30, 2024 increased
Capital Structure, Leverage and Liquidity
During the nine months ended June 30, 2024, the Company issued 546,174 shares of common stock under its at-the-market equity offering program for proceeds of
Forestar ended the quarter with
Outlook
Donald J. Tomnitz, Chairman of the Board, said, “Demand for finished lots remained solid during the third quarter of fiscal 2024. The team delivered 3,255 lots generating
“The supply of vacant developed lots, particularly at affordable price points, continues to be constrained across most of the country, and Forestar is uniquely positioned to take advantage of the shortage of finished lots for the homebuilding industry. Based on our fiscal year-to-date results and expectations for the fourth quarter, in fiscal 2024, we now expect to deliver between 14,600 and 15,100 lots compared to prior guidance of delivering between 14,500 and 15,500 lots. We still expect to generate
“We remain focused on growing our platform, turning our inventory, maximizing returns and consolidating market share in the highly fragmented lot development industry. Our contracted backlog, strong balance sheet and ample liquidity position us to continue gaining market share and invest in land opportunities to drive our future growth. We will maintain our disciplined approach to capital allocation to enhance the long-term value of Forestar.”
Conference Call and Webcast Details
The Company will host a conference call today (Thursday, July 18) at 5:00 p.m. Eastern Time. The dial-in number is 888-506-0062, the entry code is 893213 and the call will also be webcast from the Company’s website at investor.forestar.com.
About Forestar Group Inc.
Forestar Group Inc. is a residential lot development company with operations in 60 markets and 24 states. Based in
Forward-Looking Statements
Portions of this document may constitute “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to Forestar on the date this release was issued. Forestar does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements in this release include the supply of vacant developed lots, particularly at affordable price points, continues to be constrained across most of the country; Forestar is uniquely positioned to take advantage of the shortage of finished lots for the homebuilding industry; in fiscal 2024, we now expect to deliver between 14,600 and 15,100 lots compared to prior guidance of delivering between 14,500 and 15,500 lots; and we still expect to generate
Factors that may cause the actual results to be materially different from the future results expressed by the forward-looking statements include, but are not limited to: the effect of D.R. Horton’s controlling level of ownership on us and the holders of our securities; our ability to realize the potential benefits of the strategic relationship with D.R. Horton; the effect of our strategic relationship with D.R. Horton on our ability to maintain relationships with our customers; the cyclical nature of the homebuilding and lot development industries and changes in economic, real estate and other conditions; the impact of significant inflation, higher interest rates or deflation; supply shortages and other risks of acquiring land, construction materials and skilled labor; the effects of public health issues such as a major epidemic or pandemic on the economy and our business; the impacts of weather conditions and natural disasters; health and safety incidents relating to our operations; our ability to obtain or the availability of surety bonds to secure our performance related to construction and development activities and the pricing of bonds; the strength of our information technology systems and the risk of cybersecurity breaches and our ability to satisfy privacy and data protection laws and regulations; the impact of governmental policies, laws or regulations and actions or restrictions of regulatory agencies; our ability to achieve our strategic initiatives; continuing liabilities related to assets that have been sold; the cost and availability of property suitable for residential lot development; general economic, market or business conditions where our real estate activities are concentrated; our dependence on relationships with national, regional and local homebuilders; competitive conditions in our industry; obtaining reimbursements and other payments from governmental districts and other agencies and timing of such payments; our ability to succeed in new markets; the conditions of the capital markets and our ability to raise capital to fund expected growth; our ability to manage and service our debt and comply with our debt covenants, restrictions and limitations; the volatility of the market price and trading volume of our common stock; and our ability to hire and retain key personnel. Additional information about issues that could lead to material changes in performance is contained in Forestar’s annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.
FORESTAR GROUP INC. |
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Consolidated Balance Sheets |
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(Unaudited) |
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June 30, 2024 |
|
September 30, 2023 |
||
|
(In millions, except share data) |
||||
ASSETS |
|
|
|
||
Cash and cash equivalents |
$ |
359.2 |
|
$ |
616.0 |
Real estate |
|
2,238.7 |
|
|
1,790.3 |
Investment in unconsolidated ventures |
|
0.3 |
|
|
0.5 |
Property and equipment, net |
|
6.5 |
|
|
5.9 |
Other assets |
|
70.3 |
|
|
58.0 |
Total assets |
$ |
2,675.0 |
|
$ |
2,470.7 |
LIABILITIES |
|
|
|
||
Accounts payable |
$ |
70.9 |
|
$ |
68.4 |
Accrued development costs |
|
112.5 |
|
|
104.1 |
Earnest money on sales contracts |
|
163.8 |
|
|
121.4 |
Deferred tax liability, net |
|
52.8 |
|
|
50.7 |
Accrued expenses and other liabilities |
|
56.0 |
|
|
61.2 |
Debt |
|
706.1 |
|
|
695.0 |
Total liabilities |
|
1,162.1 |
|
|
1,100.8 |
EQUITY |
|
|
|
||
Common stock, par value 50,607,995 and 49,903,713 shares issued and outstanding at June 30, 2024 and September 30, 2023, respectively |
|
50.6 |
|
|
49.9 |
Additional paid-in capital |
|
664.6 |
|
|
644.2 |
Retained earnings |
|
796.7 |
|
|
674.8 |
Stockholders' equity |
|
1,511.9 |
|
|
1,368.9 |
Noncontrolling interests |
|
1.0 |
|
|
1.0 |
Total equity |
|
1,512.9 |
|
|
1,369.9 |
Total liabilities and equity |
$ |
2,675.0 |
|
$ |
2,470.7 |
FORESTAR GROUP INC. |
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Consolidated Statements of Operations |
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(Unaudited) |
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Three Months Ended
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|
Nine Months Ended
|
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|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(In millions, except per share amounts) |
||||||||||||||
Revenues |
$ |
318.4 |
|
|
$ |
368.9 |
|
|
$ |
958.0 |
|
|
$ |
887.1 |
|
Cost of sales |
|
246.9 |
|
|
|
283.9 |
|
|
|
730.6 |
|
|
|
698.7 |
|
Selling, general and administrative expense |
|
29.3 |
|
|
|
26.4 |
|
|
|
86.5 |
|
|
|
71.3 |
|
Gain on sale of assets |
|
(5.0 |
) |
|
|
— |
|
|
|
(5.0 |
) |
|
|
(1.6 |
) |
Interest and other income |
|
(4.4 |
) |
|
|
(3.8 |
) |
|
|
(15.7 |
) |
|
|
(7.5 |
) |
Income before income taxes |
|
51.6 |
|
|
|
62.4 |
|
|
|
161.6 |
|
|
|
126.2 |
|
Income tax expense |
|
12.9 |
|
|
|
15.6 |
|
|
|
39.8 |
|
|
|
31.7 |
|
Net income |
$ |
38.7 |
|
|
$ |
46.8 |
|
|
$ |
121.8 |
|
|
$ |
94.5 |
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per common share |
$ |
0.76 |
|
|
$ |
0.94 |
|
|
$ |
2.42 |
|
|
$ |
1.89 |
|
Weighted average number of common shares |
|
50.8 |
|
|
|
50.1 |
|
|
|
50.3 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per common share |
$ |
0.76 |
|
|
$ |
0.93 |
|
|
$ |
2.40 |
|
|
$ |
1.89 |
|
Adjusted weighted average number of common shares |
|
51.1 |
|
|
|
50.2 |
|
|
|
50.7 |
|
|
|
50.0 |
|
FORESTAR GROUP INC. |
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Revenues, Residential Lots Sold and Lot Position |
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REVENUES |
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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|
|
2024 |
|
|
|
2023 |
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|
2024 |
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|
2023 |
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(In millions) |
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Residential lot sales: |
|
|
|
|
|
|
|
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Development projects |
$ |
295.7 |
|
|
$ |
334.2 |
|
$ |
922.3 |
|
$ |
790.3 |
Lot banking projects |
|
10.3 |
|
|
|
— |
|
|
11.0 |
|
|
— |
(Increase) decrease in contract liabilities |
|
(0.2 |
) |
|
|
0.6 |
|
|
2.6 |
|
|
4.0 |
|
|
305.8 |
|
|
|
334.8 |
|
|
935.9 |
|
|
794.3 |
Deferred development projects |
|
0.5 |
|
|
|
10.3 |
|
|
3.5 |
|
|
24.6 |
|
|
306.3 |
|
|
|
345.1 |
|
|
939.4 |
|
|
818.9 |
Tract sales and other |
|
12.1 |
|
|
|
23.8 |
|
|
18.6 |
|
|
68.2 |
Total revenues |
$ |
318.4 |
|
|
$ |
368.9 |
|
$ |
958.0 |
|
$ |
887.1 |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
RESIDENTIAL LOTS SOLD |
|||||||||||
|
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
|||||||||
|
|
2024 |
|
|
|
2023 |
|
|
2024 |
|
|
2023 |
Development projects |
|
3,163 |
|
|
|
3,812 |
|
|
9,593 |
|
|
9,054 |
Lot banking projects |
|
92 |
|
|
|
— |
|
|
101 |
|
|
— |
|
|
3,255 |
|
|
|
3,812 |
|
|
9,694 |
|
|
9,054 |
|
|
|
|
|
|
|
|
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Average sales price per lot (1) |
$ |
94,000 |
|
|
$ |
87,700 |
|
$ |
96,300 |
|
$ |
87,300 |
|
|
|
|
|
|
|
|
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|
|
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LOT POSITION |
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|
|
|
|
June 30, 2024 |
|
September 30, 2023 |
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Lots owned |
|
|
57,900 |
|
|
52,400 |
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Lots controlled under land and lot purchase contracts |
|
|
44,200 |
|
|
26,800 |
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Total lots owned and controlled |
|
|
102,100 |
|
|
79,200 |
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|
|
|
|
|
|
|
|
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Owned lots under contract to sell to D.R. Horton |
|
|
19,500 |
|
|
14,400 |
||||||
Owned lots under contract to customers other than D.R. Horton |
|
|
900 |
|
|
600 |
||||||
Total owned lots under contract |
|
|
20,400 |
|
|
15,000 |
||||||
|
|
|
|
|
|
|
|
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Owned lots subject to right of first offer with D.R. Horton based on executed purchase and sale agreements |
|
|
16,700 |
|
|
17,000 |
||||||
Owned lots fully developed |
|
|
5,900 |
|
|
6,400 |
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Owned lots fully developed related to lot banking |
|
|
300 |
|
|
— |
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_____________
(1) |
Excludes any impact from change in contract liabilities. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240718111623/en/
Katie Smith, 817-769-1860
Vice President of Finance & Investor Relations
InvestorRelations@forestar.com
Source: Forestar Group Inc.
FAQ
What were Forestar's (FOR) fiscal 2024 Q3 earnings?
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