Centex Posts $908 Million Loss

Centex lost $7.34 a share for the fiscal fourth quarter ended March 31, a mighty achievement for a $21 stock. The average analyst forecast a loss of $2.22 a share. I suppose we could call this a bit of a miss by those tasked with analyzing the homebuilder's earnings. The loss included some charges, $362 million related to land write-downs and $395 million related to the sale of 8,545 lots. Subtract out the write-downs inventory sales and the company lost money selling housing, which is its core business, even though these numbers would suggest that Centex is actually in the business of puking land that it purchased at ridiculous valuations with borrowed money. A quick look at its homebuilding results shows a bleak picture. Revenues slid 36% on a 33% drop in the number of homes sold. The average selling price fell 15% and gross margins fell 10% from a year earlier. Although the stock was down before the earnings announcement yesterday, it barely responded to the announcement, as if this news was already "priced in" to the valuation. In my opinion, what doesn't appear to be "priced in" to all of the homebuilder stocks is the effect of all the vacancies, foreclosures, negative equity, mortgage defaults, and enormous inventories still sitting out there looking for a bottom. We absolutely have not seen the bottom in the housing market. Too much inventory plus lack of financing does not a bottom make. Facing the possibility of spiraling inflation The Fed signaled yesterday that it may be finished easing. Monetary Policy won't help the homebuilders anymore, or the banks they rely upon to lend their customers money to purchase houses. Some of the homebuilders will be toast by the end of the year.