Forestar Group Inc reports results for the quarter ended September 30 - Earnings Summary

What happened

Forestar Group Inc reported quarterly adjusted earnings of $1.15 per share, below last year's $1.70 and the $1.26 analyst average. Revenue fell 13.4% to $580.80 million, missing the expected $613.84 million. Quarterly net income was $59.2 million.

Confirmed

Global impact / market context

Lower earnings and revenue show Forestar sold fewer homes or at lower prices, which reduces cash coming in to fund land purchases and construction. Missing analyst estimates can push investors to reassess future profit, since the company earns money mainly by selling developed lots to homebuilders.

Analyst inference

Analysts still rate the shares a buy on average, with two buy calls and one hold, and a median price target of $35.00 versus the $25.03 last close. The stock fell 2.8% this quarter but is up 1.6% this year, suggesting investors already expected soft results.

Analyst inference

What to watch

1. Watch whether Forestar's revenue decline of 13.4% continues next quarter, since that would signal weaker demand for developed lots from homebuilders. Confirmed
2. Analysts could cut future earnings estimates if revenue keeps missing expectations, which may lower the $35.00 median price target and pressure the shares. Proposed
3. Track homebuilder demand and land prices, because Forestar's profit depends on selling lots at prices that cover land and construction costs. Analyst inference

Evidence

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