The company easily topped analyst estimates in its fiscal second quarter, but its immediate future might not be so rosy.

The stock of Forestar Group (FOR 0.99%), a publicly traded subsidiary of big home builder D.R. Horton that concentrates on developing real estate lots, hasn’t built much wealth for investors in recent days.

According to data compiled by S&P Global Market Intelligence, Forestar’s share price was down by nearly 17% week to date as of early Friday morning. It seems the market wasn’t impressed by the company’s latest set of quarterly results.

A double beat in the second quarter

On Thursday, Forestar said it managed to increase its total revenue by 11% year over year to just under $334 million in its fiscal second quarter of 2024, ended March 31. The company’s improvement on the bottom line was far more dramatic, with generally accepted acconting principles (GAAP) net income rising a sturdy 67% to $45 million, equating to $0.89 per share.

Both headline numbers landed far ahead of the consensus-analyst estimates. Prognosticators tracking the stock were, on average, anticipating less than $326 million on the top line. They were also modeling only $0.73 per share for GAAP net income.

Forestar’s success is dependent on the number of lots it develops and sells. During the quarter, it increased that count by 10% year over year to a total of 3,289.

Top-line guidance fails to satisfy

While it was a “so far, so good” situation with the trailing results, Forestar’s guidance put a bit of a damper on that positive news. The company said that it anticipates delivering 14,500 to 15,500 lots for the entirety of this fiscal year. This should bring in $1.4 billion to $1.5 billion during the period. However, the average-analyst estimate for total revenue is $1.53 billion.

Additionally, earlier in the week Federal Reserve officials indicated that the central bank might not cut its key interest rates this year due to a higher-than-expected inflation reading for March. Previously, they had been aiming for three reductions during the year.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Source link