Four Star (FOR) Q4 2025: Lot Portfolio Rises to 99,800, Reinforcing Market Share Ambitions
Four Star’s fiscal 2025 closed with a record 99,800-lot portfolio, underscoring its aggressive land banking and market expansion strategy. While affordability constraints and cautious homebuyer sentiment weighed on near-term velocity, the company’s strong capital position and deepening DR Horton relationship provide a platform for steady share gains. Investors should focus on the company’s disciplined underwriting, capital flexibility, and ability to navigate regional demand shifts as it targets 14,000 to 15,000 lot deliveries in 2026.
Summary
- Lot Supply Strength: Four Star’s 99,800-lot position supports growth and market share gains with major builders.
- Capital Structure Advantage: Ample liquidity and low leverage set the company apart from project-financed competitors.
- Guidance Watchpoint: Back-half weighted delivery outlook hinges on spring selling season and affordability trends.
Performance Analysis
Four Star reported solid top-line growth in fiscal 2025, with revenue up 10% to $1.7 billion, driven by 14,240 lot sales at an average price of $108,400. The fourth quarter saw 4,891 lots sold, with average prices fluctuating due to geographic and lot size mix. Gross profit margin contracted 160 basis points year-over-year to 22.3%, reflecting normalization after an unusually high-margin project in the prior year.
SG&A expense rose in absolute terms, but efficiency gains kept it at 6.4% of revenue in the fourth quarter. Pre-tax income increased 4% for the quarter, aided by a $4.5 million gain on asset sales. The company ended the year with $968 million in liquidity and a conservative net debt to capital ratio of 19.3%, reinforcing its balance sheet strength. Book value per share climbed 11% to $34.78, reflecting retained earnings and disciplined capital deployment.
- Lot Portfolio Expansion: The company’s 99,800-lot position, with 65% owned and 35% controlled, anchors future delivery capacity.
- Customer Concentration: DR Horton remains the largest customer, with 15% of their home starts on Four Star-developed lots and a stated goal to deepen this partnership.
- Regional Demand Dynamics: Choppiness in Texas and Florida is offset by steady absorption at affordable price points, supporting the company’s entry-level focus.
Overall, Four Star’s performance reflects a disciplined approach to growth, balancing capital investment with market risk and positioning for incremental share within a fragmented industry.
Executive Commentary
"We continue to execute our strategy to expand the business through significant investments in land and land development and growth of our team. These investments helped us enter seven new markets and increase our community count by over 10%."
Andy Oxley, Chief Executive Officer
"Four Star's capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers. Project-level land acquisition and development loans are less available today and have continued to be more expensive, which impacts the majority of our competitors."
Jim, Executive Vice President, Sales & Marketing
Strategic Positioning
1. Land Bank Scale and Flexibility
Four Star’s 99,800-lot portfolio—65% owned, 35% controlled— provides a multi-year runway for deliveries and revenue. This approach, known as land banking, gives the company flexibility to pace development in line with demand and manage risk exposure. The company targets a three to four-year supply, balancing owned and optioned lots to avoid overcommitment in uncertain markets.
2. DR Horton Partnership and Diversification
DR Horton, the nation’s largest homebuilder, is Four Star’s anchor customer, accounting for a significant portion of lot deliveries. The companies have a mutual goal for one in three DR Horton homes to be built on a Four Star lot. Importantly, Four Star is broadening its base, selling to more than 20 builders and adding six new customers in 2025, which reduces single-customer concentration risk and taps broader market demand.
3. Capital Structure as a Competitive Moat
Four Star’s balance sheet strength—$968 million in liquidity and a net debt to capital ratio of 19.3%— enables it to self-fund land acquisition and development, avoiding the restrictive, floating-rate project loans that burden many competitors. This capital structure provides flexibility to pursue attractive deals, weather interest rate volatility, and maintain operational agility.
4. Disciplined Underwriting and Returns Focus
Management maintains strict underwriting standards, requiring a minimum 15% pre-tax return on average inventory and cash payback within 36 months for new projects. This discipline, coupled with stable land development costs and improved cycle times, supports consistent project-level returns even as demand fluctuates.
5. Geographic Breadth and Entry-Level Focus
Expansion into seven new markets and a focus on entry-level lots positions Four Star to capture demand from first-time buyers, the largest segment of the new home market. While some Texas and Florida markets are showing softness, the company’s affordable price points and diversified footprint help mitigate regional volatility.
Key Considerations
Four Star’s fiscal 2025 was defined by operational discipline, capital strength, and strategic positioning for long-term share gains. The following considerations are central for investors evaluating the company’s outlook:
Key Considerations:
- Spring Selling Season Sensitivity: 2026 delivery guidance is contingent on market absorption in the spring, which will set the pace for the year’s growth trajectory.
- SG&A Leverage Potential: Headcount is expected to remain flat or drift down, supporting potential margin expansion as revenue grows.
- Affordability Constraints: Mortgage rate buy-downs and builder incentives remain necessary to spur demand, especially at entry-level price points.
- Customer Mix Evolution: Continued diversification beyond DR Horton is crucial to reduce concentration risk and smooth revenue volatility.
- Regional Variability: Choppiness in Texas and Florida highlights the importance of geographic diversification and project-level risk management.
Risks
Home affordability remains the most significant near-term risk, with high mortgage rates and cautious consumer sentiment potentially dampening demand. Regional softness, particularly in Texas and Florida, could weigh on absorption rates. Competitive pressure from builders seeking price concessions or extended takedown schedules may compress margins if market conditions deteriorate. Project-level execution risk and dependency on DR Horton as a primary customer also warrant close monitoring.
Forward Outlook
For fiscal 2026, Four Star guided to:
- Lot deliveries between 14,000 and 15,000
- Revenue in the range of $1.6 to $1.7 billion
For full-year 2026, management expects:
- Back-half weighted delivery cadence, with the first quarter as the lowest of the year
Management emphasized several factors that will influence results:
- Market absorption in spring will determine the ability to accelerate deliveries
- Affordability constraints and cautious buyers are expected to persist near-term
Takeaways
Four Star’s fiscal 2025 reinforced its position as a leading national land developer, with scale, liquidity, and a disciplined approach to growth. The company’s performance and guidance suggest a cautious but opportunistic stance as it navigates affordability headwinds and regional demand shifts.
- Lot Portfolio Depth: The 99,800-lot supply gives Four Star a multi-year growth runway and flexibility to match builder demand.
- Capital Structure Edge: Superior liquidity and low leverage allow Four Star to outmaneuver project-financed competitors, especially in a higher-rate environment.
- Market Share Opportunity: Investors should watch for signs of accelerated DR Horton penetration and further customer diversification as key levers for future upside.
Conclusion
Four Star delivered on its core strategy in 2025, expanding land holdings, strengthening its balance sheet, and deepening builder relationships. While near-term demand is sensitive to affordability and regional trends, the company’s disciplined execution and capital flexibility position it for continued share gains in a fragmented market.
Industry Read-Through
The results highlight the growing importance of scale, liquidity, and disciplined underwriting in the land development sector. Four Star’s ability to self-fund land acquisition and development sets a new bar for competitors reliant on restrictive project financing, especially as interest rates remain elevated. The deepening integration with DR Horton signals a trend toward tighter builder-developer partnerships, which could reshape competitive dynamics and margin structures across the homebuilding supply chain. Regional softness in key Sunbelt states signals that affordability will remain a central theme for both land developers and builders into 2026.