Homebuilders
NEW YORK (CBS.MW) -- News of slower-than-expected growth in new orders and disappointment over margins at Lennar Corp. took a toll on homebuilding stocks Monday even as investors awaited numbers from KB Home.
The news spooked investors who are worried about the future of the group in a rising interest-rate environment.
Fed watchers expect the Federal Reserve will raise its federal funds rate to 1.75 percent from 1.50 percent when it meets on Tuesday. See Economic Preview.
Among those in the sector trading lower were Pulte Corp. (PHM: news, chart, profile) down 1.5 percent; Hovnanian Enterprises (HOV: news, chart, profile) off 2.8 percent; Toll Bros. (TOL: news, chart, profile) shedding 2.4 percent; Ryland Group (RYL: news, chart, profile) dropping 2.2 percent; Beazer Homes (BZH: news, chart, profile) with a loss of 1.9 percent; and D.R. Horton (DHI: news, chart, profile) declining 2.1 percent.
KB Home (KBH: news, chart, profile) slid 1.2 percent ahead of its report, set for release after the closing bell.
Lennar (LEN: news, chart, profile) fell 3.4 percent after growth in new orders came up a bit short, even though the company reported third-quarter earnings and revenue that exceeded expectations and boosted its outlook. See full story.
New orders at Lennar edged up 1.2 percent to 9,338, compared to the prior year, as a 22 percent rise in orders from markets in the central U.S. offset a 6.7 percent drop in orders from the East and a 6.4 percent drop in orders from the West.
"While we had expected order growth to decelerate given LEN's stated intentions to slow growth to match construction activity and the hurricanes, orders were still well below our estimate -- falling 2 percent year-over-year versus our 13 percent estimate," J.P. Morgan analyst Michael Rehaut told clients.
Gross margin, meanwhile, declined 0.8 of a percentage point.
Analysts had been expecting a good week for the sector.
In a Sept. 16 research report, JMP Securities analyst James Wilson recommended buying homebuilding stocks ahead of the two earnings releases and investor conferences being by Bank of America and Credit Suisse First Boston.
"We expect a number of the builders to put out press releases in the next few days pre-announcing order activity for the third quarter of 2004 and/or giving guidance for 2005," Wilson wrote. "Given that backlogs for most builders are up 30 to 75 percent through the second quarter of 2004 and that orders appear to remain strong through the third quarter of 2004, we believe consensus earnings estimates for 2005 that are up less than 10 percent appear conservative and will be raised." |
