Altruistica

"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

03 January 2007

LEN and HOV Warnings Signal Worst NOT Over in Housing


Lennar- Another Homie Takes a Massive Write-off,What Book Value Support on these POSs??

Lennar's Nov Qtr was way below est w/$400-$500m in Writeoffs. The Street was looking for $1.07, guided to .70-.75 cents. Loss of (.88) to $1.28 after writeoffs. Write-offs of $400-$500m mean half-billion of book value erased! The CEO's comments can't be construed as "rosy" either:

Mr. Miller continued, "Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery. While we are hopeful that low interest rates, strong employment and a healthy economy will help stimulate a recovery in 2007, we have continued to focus on strengthening our balance sheet by delivering our backlog, selling inventory aggressively and renegotiating our land positions


Glad to hear he remains "hopeful".

Billions of dollars in addl. write-offs still on the way from other HB's on the way I imagine and if the housing market declines further billions more in writeoffs will come from the $2Trillion in Mortgage Resets.

A Nasty Hangover for Homebuilders

Wednesday January 3, 8:08 am ET, BusinessWeek Online

It was a rude New Year greeting for housing-market optimists. Homebuilder Lennar Corp. (NYSE:LEN - News) warned on Jan. 2 that it will have a sharply lower than expected profit during the fourth quarter, as the Miami-based concern struggles in a slowing market.

Lennar is not the first big industry player to announce writedowns. Hovnanian Enterprises (NYSE:HOV - News) on Dec. 18 reported a third-quarter loss of $117.9 million after $355 million in charges related to inventory impairments and land option write-offs (see BusinessWeek.com, MM/DD/YY, "Homebuilders Take Another Hit").

"Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery," said Lennar's CEO Stuart Miller in a press release. "While we are hopeful that low interest rates, strong employment and a healthy economy will help stimulate a recovery in 2007, we have continued to focus on strengthening our balance sheet by delivering our backlog, selling inventory aggressively and renegotiating our land positions." Lennar has much fewer unfilled orders for homes this year compared to last. The company's total dollar value of homes in backlog as of November 30, 2006 was $4.0 billion, compared to $6.9 billion as of November 30, 2005. The company says it had much lower profit margins on home sales because of the deteriorating market conditions in the homebuilding industry.



Lennar Employees Speak Out (Not rated) 1-Jan-07

Postings from www.Lennar-Homes.info

HOV Cutting 07 EPS again in NYC meetings $1.25-1.50?
Hovnanian Enterprises Inc-HOV mtg w/mgmt in New York 1/4 sponsor JPMS :

12/31:Doug Kass believes the worst is still to come in housing-Barron's
In his "Up and Down Wall Street" column, Alan Abelson points out that while Doug Kass is no longer short housing stocks, he believes the worst is still to come. Kass says that the supposed "modest increase" in new home sales may come from the Census Bureau not adjusting for cancellations when house sales are comprised, which could lead to overstated sales and understated inventory. Cancellatoins are usually about 15% of orders for the home builders but have soared this year, the third quarter rate for each of the leading home builders was: Centex (CTX), 37%; DR Horton (DHI), 40%; KB Home (KBH), 53%; Lennar (LEN), 31%; Pulte Homes (PHM), 36%; Beazer (BZH), 57%; Hovnanian (HOV), 35%; MDC Holdings (MDC), 49%; and Standard Pacific (SPF), 50%.

12/18 results:Hovnanian Enter-HOV reports Q4 EPS ($1.88) incl ch. vs consensus estimate $1.09
Reports Q4 revenue of $1.75B versus consensus estimate of $1.71B. Note: the Q4 EPS stat is unlikely to be comparable to the consensus estimate. Sees F2007 EPS of $1.50-$2.00 versus consensus estimate of $2.70.

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