Another homebuilder is coming due for a teardown. This time it's Beazer Homes (NYSE:BZH) that will report first-quarter 2007 financial results on Thursday, Jan. 25.

What analysts say:

  • Buy, sell, or waffle? Nine analysts cover the not-so-happy homemaker and they're evenly divided: three say buy, three say hold, and three say sell.
  • Revenues. Revenues are expecting to get hit with a sledgehammer, falling 34% to $720.6 million.
  • Earnings. Earnings, too, are awaiting the wrecking ball as they are forecast to fall 77%, from $2.00 per share last year all the way down to $0.46 this time out.

What management says:
Beazer has been one of the homebuilders not trying to jawbone a soft landing for the industry, admitting there were few signs of anything but a rough road ahead. President and CEO Ian McCarthy noted, "Despite recent references to a signs of a bottoming or even the beginnings of a recovery, we have not yet seen any meaningful evidence to suggest that a rebound in the housing market is imminent."

He knew from whence he spoke. Last time out Beazer had seen a 58% decline in new orders, cancellation rates were as high as 57%, and its inventory backlog was down 45%, reflecting the lack of new orders as it was finishing off its closings. Rather than putting more homes up in the hopes a buyer would come, it simply sold off what it had.

What management does:
In what has become a drumbeat like roofers putting up new shingles, Beazer Homes was able to maintain a semblance of good order until the fourth quarter, when its own roof caved in and shattered margins.

To sell the homes it did in the fourth quarter -- it actually reported a 1% increase in the number of homes closed at prices 2% over last year -- it had to offer an increasing number of incentives to get buyers into the homes. The company was also affected by having to get out of land contracts leading to an $18 million charge along with $5.6 million in inventory impairments. Expect significantly higher writedowns and impairments this time out.

Margin %

09/05

12/05

03/06

06/06

09/06

Gross

24.7

24.6

24.9

25.3

23.4

Op.

13.7

13.4

13.6

13.7

11.5

Net

5.3

5.4

8.6

8.6

7.1
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
There's no reason to expect Beazer Homes' first quarter to be anything but more of what it and other homebuilders have experienced up to this point. While the early months of 2007 may in fact end up showing that the tide has turned and new home sales are on the rise, Beazer is still looking at the waning days of 2006 with its upcoming report and, as other builders have shown, those were indeed dark days. Expect the demolition work to continue.

Competitors:

  • Centex (NYSE:CTX)
  • Brookfield Homes (NYSE:BHS)
  • D.R. Horton (NYSE:DHI)
  • Pulte Homes (NYSE:PHM)
  • Toll Brothers (NYSE:TOL)
  • Ryland Homes (NYSE:RYL)

Related Foolishness:

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.