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On Monday, BTIG analyst Ryan Gilbert adjusted the price target for Forestar Group (NYSE:FOR) shares, bringing it down to $29 from the previous $36, while still upholding a Buy rating on the stock. The new price target reflects a tempered outlook following the company’s fiscal second-quarter earnings report. With the stock currently trading at $18.93, significantly below its 52-week high of $37.21, InvestingPro analysis indicates the stock is undervalued based on its Fair Value calculations.
Forestar Group reported a fiscal second-quarter earnings per share (EPS) of $0.62, which surpassed BTIG’s estimate of $0.48. The earnings beat was attributed to higher lot sales volume, reduced sales, general and administrative (SG&A) expenses relative to sales, and a lower tax rate. These factors were slightly offset by a decline in average revenue per lot and interest or other income, with a slight miss on the gross margin by 10 basis points.
Despite the positive earnings, Forestar’s fiscal year 2025 guidance was less encouraging, with the company scaling back its lot volume and revenue projections by 6% at their midpoints from the previous guidance. This adjustment appears to be a proactive measure in anticipation of a potential slowdown in lot takedown rates from customers, as opposed to cancellations of options. Notably, D.R. Horton, a major customer and the majority owner of Forestar, has reduced its FY25 delivery projection by 5.5% at the midpoint, although it expects housing starts to pick up in the second half of 2025 after a 19% sequential drop in finished inventory in the second fiscal quarter.
Halfway through FY25, it seems unlikely that Forestar will meet BTIG’s initial expectations for growth in the latter half of the year. Consequently, BTIG has lowered its EPS estimates for FY25 to $3.25 from $3.80 and for FY26 to $3.50 from $4.25. Gilbert notes that around 25% of this reduction is due to increased SG&A costs to support growth and lower interest income, with the rest mostly related to volume changes.
Despite these adjustments, BTIG’s long-term view on Forestar remains positive. The firm considers the stock undervalued at 58% of book value and emphasizes Forestar’s significant role as the nation’s largest pure-play company in control of a key resource in the homebuilding value chain. BTIG believes there is a considerable opportunity for Forestar to expand its market share in the fragmented and undercapitalized segment of the housing ecosystem. InvestingPro analysis reveals the stock trades at an attractive P/E ratio of 5.76x and maintains a return on equity of 11%. Subscribers can access 14 additional ProTips and a comprehensive Pro Research Report for deeper insights into Forestar’s financial health and growth potential.
In other recent news, Forestar Group Inc reported its second-quarter earnings for 2025, missing both earnings per share (EPS) and revenue estimates. The company posted an EPS of $0.62, falling short of the expected $0.67, while revenue reached $351 million, below the forecasted $386.14 million. Despite this, the company achieved a 5% year-over-year increase in revenue. Forestar has set a target for the fiscal year 2025, aiming for $1.5 to $1.55 billion in revenue and the development of 30,500 lots. The company plans to moderate land acquisition investments while focusing on affordable lot development. Analysts from BTIG and Citi raised concerns about the company’s rising SG&A expenses and the potential impact on profit margins. Forestar’s management highlighted their flexibility in land development terms and stable gross margin expectations as key strategies to navigate current market conditions.
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