Two more public home builders will report earnings this week, PulteGroup on Wednesday and Beazer Homes USA on Friday. Analysts aren't expecting either to post a profit, but there were some surprises in last week's earnings reports that could bode well for these two builders as well.
Some hot topics that have been brought up by other builders in recent earnings calls that should make another appearance in the two reports this week include any exposure builders might have to mortgage put-backs, where the investor buyers of loans that have gone bad and were issued by the builder or its mortgage entity ask for their money back. Pulte has its own mortgage company, and Beazer used to.
Other universal topics include: whether builders had discounted home prices or offered more incentives to get them sold in the summer, whether there have been more recent layoffs, and the state of demand for land.
It's been more than a year since Pulte Homes merged with Centex to become PulteGroup, so, finally, this quarter's earnings might offer more apples-to-apples comparisons of how the new PulteGroup is performing as a stand-alone company.
The company posted its first profit in more than three years last quarter, a fact management didn't play up much, perhaps because a tax refund helped boost the bottom line. Analysts' consensus is that the Bloomfield Hills, Mich.-based company will lose $0.05 a share, with the more optimistic suggesting a profit of $0.09 and the more pessimistic betting on a $0.20 loss.
To watch: Last quarter, CEO Richard Dugas said the company was "looking to fund" something with its prodigious pile of cash. The company is already fairly land rich, thanks to the merger and Pulte's ongoing policy of holding onto land versus selling it in the downturn. So perhaps the company might choose to buy back debt with its cash. Or, given the summer slump, holding onto its cash until things are closer to improving might be a more likely decision.
Beazer Homes USA
Beazer backslid a bit last quarter, turning in a loss of $0.41 a share after posting profits for three quarters prior. Some of the loss was related to extinguishing debt, part of the company's successful efforts to lower and extend its debt as well as raise capital.
Analysts are expecting the company to lose $0.46 a share. At the bottom of the predictions, Beazer would lose $0.84 a share. The best case estimate anticipates a $0.30 per share loss.
To watch; The progress Beazer has made in opening new communities. While the company does not give community counts, it appears to be behind other public builders in the process of replacing more expensive older developments with new neighborhoods that bring higher profit margins. Beazer executives did say last quarter that less than 1% of its recent sales had come from new developments.