2023-07-21 12:59:59 ET
Forestar Group ( NYSE: FOR ) stock jumped 7.2% in Friday midday trading after the real estate lot developer's fiscal Q3 earnings topped Wall Street expectations and BTIG upgraded the stock to Buy from Neutral, partly on the view that the company's partnership with D.R. Horton ( DHI ) will drive growth faster than expected.
BTIG analyst Carl Reichardt, Jr., wrote, "EPS will be stronger than we thought as partner D.R. Horton ( DHI ) will likely grow its orders faster than anticipated over the next 18 months, requiring an increase in lots purchased." The analyst increased his estimate for Forestar's FY2023 EPS to $2.95 from $1.99 and for FY2024 to $3.60 from $2.60.
Forestar's ( FOR ) access to capital will help it increase market share as small, local lot developers are likely to suffer from regional banks cutting back on lending, the analyst said.
In addition, the company's stock has underperformed the average homebuilding stock in BTIG's coverage, with valuation at 98% of book value.
"We continue to be believers that FOR will grow by displacing local, fragmented, and undercapitalized private developer peers, and that demand for lower-end finished lots will remain strong in a housing market with little inventory and low affordability," Reichardt said.
On Thursday, the company posted fiscal Q3 EPS of $0.93 , vs. $0.55 consensus, while revenue climbed 20% Y/Y to $369.9M. It sold 3,812 lots in the quarter ended June 30, 2023, up from 2,979 in the prior quarter and 3,406 in the year-ago period. The average sale price rose to $87.7K from $84.7K in Q2 and $86.5K in Q3 2022.
"Forestar's ( FOR ) access to capital will help it to increase market share as small, local lot developers are likely to suffer from regional banks cutting back on lending.
In addition, the company's stock has underperformed the average homebuilding stock in BTIG's coverage, with valuation at 98% of book value.
"Stronger demand for finished residential lots helped to drive solid third quarter results," said Forestar ( FOR ) CEO Daniel Bartok. "Forestar is the market leader in a highly fragmented and under-capitalized industry and is well-positioned as a key lot supplier to the homebuilding industry."
More on Forestar:
- SA Quant system rates Forestar at Hold , while a verage Wall Street rating is a Buy.
- Forestar's history of income statements
- Forestar: Headcount Growth and Lot Price Increase Could Imply Undervaluation
For further details see:
Forestar stock climbs after Q3 earnings beat, BTIG upgrade to Buy