Wednesday, January 17, 2007

Homebuilder Lennar Swings to Loss

From the

The Miami-based homebuilder lost $196 million, or $1.24 a share, for the quarter ended Dec. 31, reversing the year-ago profit of $581 million, or $3.54 a share. Revenue slipped 15% from a year ago to $4.27 billion.

Analysts surveyed by Thomson Financial were looking for an loss of 81 cents a share on sales of $4.15 billion.

The latest quarter includes write-offs of option deposits and pre-acquisition costs of $111.1 million and valuation adjustments of $382.8 million. Lennar said it posted a latest-quarter homebuilding operating loss of $319.4 million, as new orders dropped 6% from a year ago.

"Uncertain market conditions make it difficult to provide a 2007 earnings goal," CEO Stuart Miller said. "While we know that the margin in our backlog will result in lower profitability in the first half of 2007, we believe that if the current environment of strong employment, low interest rates and a healthy economy continues, and the market for new homes demonstrates traditional, seasonal improvement, we will meet or exceed our 2006 earnings of $3.69 per share."

Some of these losses could be the company loading a ton of bad news into an already bad quarter, essentially taking care of all the bad news at once. We have seen a large number housing companies report terrible fourth quarters that include a ton of bad news.

However, I wouldn't be surprised if we saw a continuation of this trend going forward for at least another quarter. Cancellations are high and the US consumer is heavily indebted with mortgage debt already. In addition, with the declining sales rate and increasing inventory, the market is shifting to a buyers market, which is going to put more downward pressure on prices.