The word "challenging" continues to be spread around the homebuilding industry like butter on breakfast toast. And why not? Just this week, three homebuilders said they'd managed to lose a combined $851 million in the most recent quarter. And a fourth, Toll Brothers, pre-released (your guess is as good as mine why) preliminary numbers report indicates that it'll have a similar tale of woe for us when its final numbers are finally disclosed.
But if any of my Foolish friends are of a mind to assume that the bloodletting is about over, I'll point out that the four companies' shares declined an average of 11.4% in the relatively short span between the first day of this month and Thursday's close, not quite a week later. So, be patient Fools, be patient.
By way of recap, let's look ever so quickly at the four builders in question and at their respective results:
First up: Standard Pacific
California-based Standard Pacific (NYSE: SPF) had the dual distinction of both leading off the week's reporting parade and turning in the biggest loss, a $440.9 million whopper that translated to $6.80 a share. Those numbers compared to a loss of $98.4 million, or $1.53 a share, last year. The biggest culprit was a collection of impairment write-downs and a tax valuation allowance that whacked $6.87 a share from the company's financials.
Without those charges, the company would have been $0.07 a share in the black. But most of the company's activity numbers continued to head south. And as CEO Stephen Scarborough told us, "As we enter 2008, we anticipate that housing market conditions will continue to weaken, resulting in a decrease in companywide deliveries."
And then M.D.C.
M.D.C. holdings
(NYSE: MDC) told us Thursday that it had lost $281.1 million in the December quarter, or $6.14 a share. That's exactly $6.00 per share more than the amount of per-share red ink used in last year's comparable quarter. It resulted from charges and a deferred tax allowance totaling about $357 million.
As you'd likely expect, the company's operating numbers also reflected continuous declines. For instance, closings in the quarter fell 39% to 2,200 units, and net new orders slid by more than 50%.
Followed by D.R. Horton
Texas-based D.R. Horton (NYSE: DHI) lost $128.8 million in the latest quarter, an amount that works out to $0.41 a share. The same quarter a year ago saw the company generate earnings of $109.7 million. Like its peers, Horton's quarter was slammed by charges. In Horton's case, the total was $245.5 million. And the company's net sales number plummeted in the quarter, with California leading the charge with a 72% drop in orders.
As the company's founder Donald Horton said, resorting to what's fast becoming homebuilding's go-to word: "We expect the housing environment to remain challenging."
Finally, Toll Brothers
Toll Brothers (NYSE: TOL), which, unlike many of its industry compatriots, continues to think we want or need multiple quarterly releases, indicated at mid-week that, when it hauls out its real numbers later this month, they also won't be especially pretty. The company believes its homebuilding revenues slid by about 22% in the quarter and that its gross signed contracts were down 38% on a unit basis, and that's before buyers begin to check out with cancellations.
Robert Toll's company builds more expensive homes than do most of the public companies, although the average was lowered by 13% from a year ago to $634,000. Despite catering to a more upscale market, Toll is "not yet seeing much light at the end of the tunnel."
Conclusions
The three companies that actually reported did far better than the trio of Meritage (NYSE: MTH), Centex (NYSE: CTX), and Pulte (NYSE: PHM), which recently managed to drop nearly a combined $2 billion. Nevertheless, I hope that Fools and other less sagacious investors aren't becoming numb to the amount of red ink being poured out by the homebuilders. These are real numbers, and they represent an industry still in big trouble.
And even though many of the builders are laboring mightily (and most successfully) to strengthen their balance sheets and shore up their liquidity -- housing's recovery will ultimately have little to do with what they do. As I've told Fools in the past, until our chaotic and dysfunctional mortgage lending world is discharged from intensive care, the homebuilders themselves will continue to require oxygen.
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