January 31, 2008

Pulte Homes 4Q loss widens amid slowdown

DETROIT - Pulte Homes Inc. on Wednesday said its fourth-quarter loss widened dramatically as the housing market worsened.

In the three months ended Dec. 31, the home builders net loss expanded to $874.7 million, or $3.46 per share, from a loss of $8.4 million, or 3 cents per share, during the same period a year earlier. The report came after the close of trading Wednesday, when shares fell $1.28, or 8.6 percent, to $13.57.

The most recent quarter included $543.3 million of charges for inventory, land and goodwill impairment.

Analysts, on average, expected the company to report a loss of 50 cents per share according to Thomson Financial, although the range of estimates was broad because some estimates included expected charges while others did not.

Revenue for the Bloomfield Hills, Mich.-based company fell to $2.9 billion from $4.39 billion.

The earnings report comes two days after the Commerce Department reported that sales of new homes dropped by 26.4 percent last year to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.

"The challenging market conditions that plagued the homebuilding industry for the first nine months of 2007 worsened in the fourth quarter," Pulte's president and chief executive, Richard J. Dugas Jr., said in a statement. "Levels of new and existing home inventory remain elevated, buyer demand for new homes continues to be weak, and mortgage availability is still a problem for many prospective homebuyers."

For the full year, the company posted a loss of $2.26 billion, or $8.94 per share, compared with a gain of $687.5 million, or $2.66 per share, in 2006. Revenue sank to $9.26 billion from $14.27 billion.

The company projected it will lose 15 cents to 30 cents per share in the first quarter, and said it expects to end 2008 with $2 billion to $2.2 billion in cash. Analysts expect a first-quarter loss of 41 cents per share.

Analyst Daniel Oppenheim of Banc of America Securities said in a research note that he expects the new homes sales rate to drop even more during parts of 2008. But he said a turnaround could be ahead.

"Better affordability, driven by lower home prices and mortgage rates, will likely help spur sales activity in coming months," Oppenheim wrote.

However, an analyst for The Motley Fool said it could be too early for investors to jump back into housing stocks.

"Homebuilders like Pulte Homes have seen renewed interest in their beaten-down stocks lately," Dave Mock wrote Wednesday. "But there's still an extensive supply of new homes that won't be picked up by consumer demand anytime soon. The purchasing power of the average American is expected to go into a prolonged decline."

The Federal Reserve issued a warning for the housing sector Wednesday as it made a half-point cut in its key interest rate to 3 percent.

"Credit has tightened further for some businesses and households," the Fed said. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets."

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