RYL -37.55 - culmination of events is short-lived.
Is the economy turning up? no
Is the real estate market turning now or 6 months from now? no
Is there a lot more blood to be shed in the RE market? Absolutely. Much more than a low from 2003 represents.
Lower rates aren't coming so soon. Will go higher first.
And they won't turn things around anytime soon nor reduce Mid-East or oil concerns.
The market will return to its downward path tomorrow,
UPDATE 4-Ryland profit falls, orders tumble, stock rises
Wed Jul 19, 2006 1:43 PM ET
(Adds CEO quote, details, update stock price)
By Ilaina Jonas
NEW YORK, July 19 (Reuters) - Ryland Group Inc. <RYL.N>, the eighth-largest U.S. home builder, on Wednesday said quarterly earnings fell 9 percent and new orders tumbled 39 percent, highlighting the deteriorating U.S. home market.
The company also slashed its full-year earnings forecast for the second time in seven weeks, but its shares, which on Tuesday had hit a near three-year low, rose 6.5 percent.
"There's going to have to be some really significantly new bad news to make these things fall further," Deutsche Bank analyst Gregg Schoenleber said.
Ryland shares have been hammered more than other large U.S. home builders, and most of the bad news already was baked into its stock price, Schoenleber said. Also, investors on Wednesday interpreted comments by Federal Reserve Chairman Ben Bernanke as hinting that the Fed could pause in its campaign to raise interest rates.
Ryland said orders for new homes during the second quarter fell 39 percent to 3,023 from 4,988 a year earlier, exceeding the company's forecast in May for a decline of 35 percent. The value of the orders fell 40 percent to $890 million.
Orders in the West -- California, Las Vegas, Denver and Arizona -- which saw some of the greatest price increases last year, were down 63 percent.
"While we knew that eventually there would be a slow down in housing this downturn happened quicker than expected," R. Chad Dreier, Ryland's chief executive, said in a conference call with analysts.
Ryland reported second-quarter earnings of $94.8 million, or $2.03 per share, down from $104.3 million, or $2.10 per share, a year earlier.
During the quarter, the company took about $20 million in write-downs for the value of about 300 lots in Riverside County, California.
But greater-than-expected land sales helped Ryland beat its own forecast for earnings of $1.95 to $2 per share, as well as analysts' average forecast of $1.94 as compiled by Reuters Estimates.
"The core home-building operations were weaker than we thought," said Rick Murray, a Raymond James and Associates analyst.
In the second quarter, Ryland closed on 3,803 homes, down 5.8 percent from the prior year. Cancellations from homes on order were up to about 36 percent, while Ryland used incentives to close deals.
"If you had a contract to buy a house and you wanted to cancel, we would do just about anything we could to keep from you canceling, Dreier said.
Revenue rose 3.2 percent to $1.2 billion, and home-building revenue increased 3.4 percent chiefly due to an 8.5 percent rise in the average home price to $295,000. Incentives represented about 5 percent or 6 percent of revenue.
Gross margins receded to 23.2 percent from 24.5 percent a year ago, and are expected to be 22 percent for the rest of the year, Dreier said.
The company cut its full-year earnings forecast to a range of $7.75 to $8.25 per share, down from a previous forecast of $8.50 to $9. The forecast includes a charge of 10 cents per share for the early extinguishment of debt.
Shares of Ryland were up $2.18 at $37.01 in afternoon trading on the New York Stock Exchange. The Dow Jones U.S. Home Construction Index .DJUSHB>, a barometer of home-building stock activity, was up 4.2 percent.
Since reaching a high on July 20, 2005, the Dow Jones U.S. Home Construction Index has lost 47 percent of its value, while Ryland shares have fallen 55 percent. |
