Interest Rate Roundup

Tuesday, September 25, 2007

Housing hammer falls at Lowe's, Lennar ...

We're getting into earnings confessional season and so far, the news ain't so good on the housing front. Two key companies had profit bombs to drop within the last 24 hours ...

* Lowe's Cos., the home improvement retailer that competes with Home Depot, said profit will come in at the low end -- or below -- its previously issued, per-share earnings guidance range of $1.97 to $2.01 per share. The company cited drought conditions in its warning, but I don't think it's a stretch to say the housing market downturn is the real problem here.

* The news out of home builder Lennar was even worse. The company reported a whopping $513.9 million net loss in the third quarter, a huge swing from $206.7 million in profit in the year-earlier period. Bloomberg is calling it the largest quarterly loss in Lennar's 53-year history.

* Some of the details: The company has cut 35% of its workforce. It offered $46,000 per home in incentives on houses delivered in Q3, up from $35,900 a year earlier. And it took $857 million in write-offs and valuation cuts to goodwill, investments, land option deposits, land, and finished homes. That compared to $76 million a year earlier. But perhaps the biggest shocker was the decline in new orders. They were down a whopping 47.5% year-over-year.

Still to come today in the sector: The July S&P/Case-Shiller Home price index and August existing home sales.


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