Pure Cycle NASDAQ: PCYO reported what Chief Executive Officer Mark Harding called “very solid results” for its fiscal third quarter, citing revenue growth, accelerated lot development at its Sky Ranch project and stronger liquidity following earlier development spending.
During the company’s third-quarter 2026 earnings presentation, Harding said Pure Cycle generated $8.2 million in revenue and $4.3 million in gross profit, representing a gross margin of about 52%. He said net income and earnings per share reflected the company’s percent-complete revenue recognition and the accelerated timing of Phase 2 development work.
“This kind of is a bit more indicative of sort of an even flow revenue and earnings cycle, which is not all that typical for us just because of the seasonality of the construction schedules here in Colorado,” Harding said.
Harding said the company remains ahead of its typical schedule for annual guidance and expects to finish the year strongly. He said Pure Cycle continues to expect gross revenue within its previously discussed guidance range of $20 million to $32 million and earnings per share around $0.50, with possible upside depending on fourth-quarter results.
Water Segment Benefits From Industrial Demand
Harding said Pure Cycle’s water business continued to benefit from its ownership of water rights in Colorado, where water availability is a key factor in land development. The company provides potable water to retail customers, including homeowners, businesses and industrial users, and also supplies raw water for industrial use, primarily in oil and gas.
He said industrial water sales have been stronger than expected compared with last year, helped by oil and gas operators that had accumulated well permits and are now executing drilling plans. Harding said the company expects strength in industrial water sales to continue over the next several years as operators drill permitted wells and evaluate additional sites.
“We continue to make sure that we’re investing in that production capacity,” Harding said. “As they continue to dial up that drilling program and the opportunity to capitalize on the price of oil, we certainly are ready to meet that demand.”
Tap fees also remained strong, Harding said, as several development phases came online and were delivered in fiscal 2026. He said tap fee strength is likely to continue through the current fiscal year and into next year.
Sky Ranch Lot Deliveries Accelerated
Pure Cycle’s land development segment also contributed to quarterly performance. Harding said the company delivered approximately 430 lots over the last 18 months, reflecting a development ramp-up initiated when the housing market was stronger in 2024.
Harding said Phase 2D was accelerated because of mild winter weather, allowing the company to deliver lots earlier than expected and giving new builders a head start. He said Pulte and Oakwood Homes have been added to the company’s builder portfolio and are moving forward with model homes and construction activity.
Phase 2E, the company’s next phase, is smaller than a typical phase at roughly 159 to 160 lots, compared with the company’s usual range of about 230 to 250 lots per phase. Harding said the company is pacing finished lot development with homebuilder absorption, noting that the broader housing market faces headwinds tied in part to consumer confidence.
“We want to make sure that we don’t over-invest into what is a very expensive lot delivery mechanism that ends up creating high inventory for our home builders,” Harding said.
He said lot deliveries through the third quarter were nearly 70% better than last year, though he added that some of that benefit was related to the mild winter and should even out by fiscal year-end.
Rental Housing Expansion Moderated
Harding said Pure Cycle has scaled back its single-family rental housing plans after previously considering a portfolio of about 100 homes through Phase 2E. The company now expects to pause expansion in the high 60s to low 70s of completed units.
He said the decision reflected a desire to better assess the regulatory environment around institutional ownership of single-family homes and to evaluate the return on investment for the portfolio. Pure Cycle may monetize a small number of homes to test market values and validate assumptions, Harding said.
The company has nearly 40 homes completed and approximately 30 more under contract, with deliveries expected through calendar 2026. Harding said demand has been strong, with nearly all delivered homes leased and some homes leased before expected delivery later in the year.
Liquidity, Buybacks and Long-Term Asset Value
Harding said Pure Cycle’s liquidity is improving after dipping in the second quarter as the company accelerated development ahead of its typical flow-funding agreements with homebuilders. He said liquidity should continue to strengthen through year-end and may support increased share repurchases.
“As that builds, we’ll continue to be more aggressive with those share repurchases to continue to return value to the shareholders,” Harding said.
In response to an analyst question, Harding discussed the company’s long-term water and land assets, saying Pure Cycle carries water rights on its balance sheet at about $30 million but believes they can support about 60,000 connections. He said tap fees of about $40,000 per connection imply roughly $2.5 billion of potential water revenue, while recurring revenue per connection could be about $1,500 to $1,700 annually.
Harding also said Sky Ranch is zoned for about 5,000 connections, including 3,400 residential units and commercial development equivalent to about 1,600 connections. At $40,000 per tap, he said that represents about $200 million in tap fee revenue. He added that the company expects to make about $100,000 per lot, or roughly $500 million, at Sky Ranch, which is carried on the balance sheet at about $5 million.
Asked about Lowry, Harding clarified that the total Lowry property footprint is about 27,000 acres, while Pure Cycle’s exclusive service rights cover 24,000 acres. The remaining acreage is not obligated to receive service from Pure Cycle but could potentially be served by the company.
Interchange Project Could Support Commercial Development
Harding said Pure Cycle continues to work with Arapahoe County and the Colorado Department of Transportation on permitting for an interchange project that would support commercial development near Sky Ranch. He said the company hopes to have the permit issued early next year, with construction potentially beginning in late 2027.
In the question-and-answer session, Harding said the estimated cost of the interchange is about $40 million. He said Pure Cycle expects bonding capacity and impact fees to cover the project, though any company obligation, if needed, would be “relatively light” and reimbursable.
Harding said commercial development could eventually add a revenue layer comparable to the company’s residential lot development business, which he described as having the potential for about $25 million per year during the build-out cycle.
The company also noted board changes during the call. Harding said two directors associated with a 13D filer resigned from the board, adding that there was “no drama” surrounding the departures and thanking them for their service.
About Pure Cycle NASDAQ: PCYO
Pure Cycle Corporation NASDAQ: PCYO is a Colorado-based utility and real estate development company focused on water resource management and land development along the Front Range. The company's core operations involve the acquisition, treatment and distribution of potable water, as well as the collection and treatment of wastewater, serving suburban and rural communities in the Denver metropolitan area. Pure Cycle holds substantial water rights and operates distribution and treatment facilities under a regulated utility model, providing essential services to residential and commercial customers.
In addition to its water utility business, Pure Cycle engages in real estate development, leveraging its water assets to create fully serviced residential communities.
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