Reply #21: Homebuilders Rise on Upgrade

[citizen snips]

NEW YORK (AP) -- Shares in homebuilders rose Tuesday after the sector's biggest player's earnings surprised Wall Street and two analysts issued bullish commentary based on data suggesting the yearlong housing slump may have reached its nadir.

D.R. Horton Inc. shares led the charge, posting a 7.5 percent gain, up $2.04, to $29.17 after the builder's fiscal third-quarter earnings came in 2 cents per share better than analysts expected.

The result fell 64 percent from a year ago, hurt by about $78 million in asset writedowns and charges to forfeit land options. But the charges were lower than many of Horton's peers. Lennar Corp. took nearly $500 million in charges, while Centex Corp., which reports earnings Tuesday as well, told investors that charges of more than $300 million would push it into the red.

Builders take writedowns to adjust the value of land or houses they no longer think can be developed and sold for a profit. The idea is to scrub the balance sheet and take a short-term hit to free up cash for when the sector recovers.

Analysts have generally applauded that strategy, another part of which is to cut prices to move inventory, which generates cash flow.

more...
http://biz.yahoo.com/ap/070123/homebuilders_mover.html?.v=1