Yahoo Finance Earnings Beat: Forestar Group Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
A week ago, Forestar Group Inc. (NYSE:FOR) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 17% higher than the analysts had forecast, at US$307m, while EPS were US$0.46 beating analyst models by 26%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Forestar Group after the latest results.
Check out our latest analysis for Forestar Group
Taking into account the latest results, the current consensus from Forestar Group's three analysts is for revenues of US$1.19b in 2021, which would reflect a substantial 20% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 28% to US$1.76. In the lead-up to this report, the analysts had been modelling revenues of US$1.13b and earnings per share (EPS) of US$1.69 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
It will come as no surprise to learn that the analysts have increased their price target for Forestar Group 10% to US$26.75on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Forestar Group analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$25.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Forestar Group's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Forestar Group's revenue growth will slow down substantially, with revenues next year expected to grow 20%, compared to a historical growth rate of 41% over the past five years. Compare this to the 124 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 18% per year. Factoring in the forecast slowdown in growth, it looks like Forestar Group is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Forestar Group's earnings potential next year. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Forestar Group analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Forestar Group (1 is a bit concerning!) that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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