Forestar Group (NYSE:FOR) Announces Earnings Results, Misses Expectations By $0.09 EPS

Forestar Group (NYSE:FOR) released its quarterly earnings data on Tuesday. The oil and gas exploration company reported $0.63 earnings per share (EPS) for the quarter, missing analysts’ consensus estimates of $0.72 by ($0.09), Zacks reports. The firm had revenue of $374.30 million for the quarter, compared to analyst estimates of $372.57 million. Forestar Group had a net margin of 9.80% and a return on equity of 9.49%. Forestar Group’s revenue for the quarter was up 6.6% on a year-over-year basis. During the same period in the previous year, the business posted $0.62 EPS.

Here are the key takeaways from Forestar Group’s conference call:

• Strong quarter and backlog: Revenues rose 7% to $374.3M and pre-tax income increased 8% to $43.9M, with book value per share up 10% year-over-year to $35.66 and a contracted backlog providing visibility to $2.2B of future revenue.
• Healthy liquidity and conservative leverage: Forestar ended the quarter with more than $1B of liquidity (including $362M cash and $672M undrawn capacity) and a net debt-to-capital ratio of 19.2%, with no senior note maturities in the next 12 months.
• Robust operational footprint and contracted sales: The company held a 94,400-lot position (63,500 owned), sold 2,938 lots at an average price of $112,800, and had 24,100 owned lots under contract secured by $209M of deposits.
• Margin pressure from option write-offs: Gross profit margin fell to 21.4% (from 22.6% a year ago), driven in part by $6.3M of land option charges and pre-acquisition write-offs versus $0.9M in the prior year quarter.
• Significant customer opportunity with D.R. Horton: D.R. Horton remains Forestar’s largest customer (14% of Horton starts on Forestar lots), and a mutual goal of reaching one-third penetration implies meaningful upside to grow share with that builder.

Forestar Group Price Performance

NYSE FOR opened at $27.26 on Thursday. Forestar Group has a fifty-two week low of $18.50 and a fifty-two week high of $30.74. The stock’s 50-day moving average is $26.60 and its two-hundred day moving average is $26.10. The company has a debt-to-equity ratio of 0.44, a current ratio of 1.36 and a quick ratio of 0.71. The firm has a market cap of $1.39 billion, a P/E ratio of 8.31 and a beta of 1.45.

Hedge Funds Weigh In On Forestar Group

A number of institutional investors have recently made changes to their positions in FOR. Caitong International Asset Management Co. Ltd increased its stake in shares of Forestar Group by 1,206.6% in the third quarter. Caitong International Asset Management Co. Ltd now owns 993 shares of the oil and gas exploration company’s stock worth $26,000 after purchasing an additional 917 shares during the period. Kestra Advisory Services LLC bought a new position in shares of Forestar Group in the fourth quarter worth about $27,000. Comerica Bank increased its stake in shares of Forestar Group by 76.5% in the third quarter. Comerica Bank now owns 1,269 shares of the oil and gas exploration company’s stock worth $34,000 after purchasing an additional 550 shares during the period. Tower Research Capital LLC TRC increased its stake in shares of Forestar Group by 201.1% in the second quarter. Tower Research Capital LLC TRC now owns 2,105 shares of the oil and gas exploration company’s stock worth $42,000 after purchasing an additional 1,406 shares during the period. Finally, State of Wyoming bought a new position in shares of Forestar Group in the fourth quarter worth about $66,000. 35.50% of the stock is currently owned by institutional investors.

Analyst Ratings Changes

A number of analysts recently issued reports on FOR shares. Zacks Research cut Forestar Group from a “strong-buy” rating to a “hold” rating in a research report on Monday, March 30th. Wall Street Zen lowered Forestar Group from a “buy” rating to a “hold” rating in a report on Friday, January 23rd. BTIG Research initiated coverage on Forestar Group in a report on Monday, March 30th. They set a “hold” rating on the stock. Citigroup raised their target price on Forestar Group from $36.00 to $38.00 and gave the company a “buy” rating in a report on Wednesday, January 28th. Finally, Weiss Ratings restated a “hold (c)” rating on shares of Forestar Group in a report on Tuesday. Two investment analysts have rated the stock with a Buy rating and four have given a Hold rating to the stock. Based on data from MarketBeat.com, the company has a consensus rating of “Hold” and a consensus target price of $32.67.

Forestar Group Company Profile

Forestar Group Inc, headquartered in Austin, Texas, is a residential lot development and management company focused on delivering finished home sites to homebuilders across the United States. The company acquires, entitles and develops land for single-family and multi-family housing, managing zoning, infrastructure and environmental approvals to prepare lots for construction. Forestar’s integrated approach to land development spans from initial site acquisition through final lot delivery, providing homebuilders with ready-to-build parcels in a variety of markets.

In addition to lot development, Forestar operates a retail homebuilding segment through joint ventures and strategic partnerships with national and regional homebuilders.