Why Forestar Group Inc. (FOR) Is Plunging In 2025

Ladies and gentlemen, buckle up! We're diving headfirst into the whirlwind of Forestar Group Inc. (FOR) and why this stock is taking a nosedive in 2025. The housing market is a rollercoaster, and Forestar is feeling the bumps and bruises. Let's break it down!



First things first, the numbers don't lie. Forestar's net income for the first quarter of fiscal 2025 plummeted by 57% to $16.5 million, or $0.32 per diluted share, compared to $38.2 million, or $0.76 per diluted share, in the same quarter of fiscal 2024. That's a gut punch! Pre-tax income also took a 57% hit, dropping to $21.9 million from $51.2 million. Ouch! Revenues weren't spared either, falling 18.2% to $250.4 million from $305.9 million. This is a red flag, folks!

But wait, there's more! The company's lot sales dropped by 26% to 2,333 lots compared to 3,150 lots in the same quarter of fiscal 2024. That's a massive decline! And with housing affordability near historical lows and new home inventory surging, the housing sector is in a tailspin. Forestar is feeling the heat, and it's showing in their stock performance.

Now, let's talk about the elephant in the room: debt. Forestar ended the first quarter of fiscal 2025 with $806.8 million in debt, with no senior note maturities until fiscal 2026. Their net debt to total capital ratio is 29.5%, which is a bit concerning. But Forestar isn't sitting idly by. They've taken steps to manage their debt, amending their credit facility to extend the maturity date to December 18, 2029, and increasing the aggregate lender commitments to $640 million. This move boosted their total liquidity to $644.5 million, giving them some breathing room.

But here's the kicker: Forestar's return on equity for the trailing twelve months ended December 31, 2024, was 12.0%, down from 13.8% for fiscal 2024. That's a red flag, folks! It shows that Forestar is struggling to generate profits from its equity investments. And with the housing market in turmoil, this could be a long, bumpy ride.



So, what's the verdict? Forestar Group Inc. is in a tough spot, and their stock is paying the price. But don't count them out just yet. They've shown resilience in the past, and with a strong balance sheet and liquidity, they might just weather this storm. But for now, it's a wait-and-see game. Stay tuned, folks, because the housing market is a wild ride, and Forestar is right in the thick of it!