Tough Quarter For Home Builder’s Stocks

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The mortgage woes are not news anymore. The question these days seems to be, not who will be hit by the subprime troubles, but who will survive and who won’t. One class of stocks that are down due these issues are those of the former high flying home builders, who have been particularly hard hit in the last quarter.

Toll Brothers (TOL), the luxury-home builder, said third-quarter net earnings dropped to $26.5 million, or 16 cents a share, down 85% from $174.6 million, or $1.07 a share, earned in the third quarter of fiscal 2006.
Most of the profit decline came from writing down the value of land and communities it owns. In all, Toll Brothers took $88.5 million, or 54 cents a share, in writedowns.

Revenue for the three months ended July 31 fell to $1.21 billion from $1.53 billion a year ago, as net signed contracts dropped to $727 million from $1.05 billion. Contract cancellations increased as a percentage of current-quarter contracts, rising to 23.8% from the prior year’s 18.9%.

Also slammed was WCI.

Meanwhile, WCI Communities (WCI), the Bonita Springs, Fla.-based builder of multi-family houses, high rises and retirement homes, said it swung to a second-quarter loss of $33.2 million.
The company’s per-share loss amounted to 79 cents, even after recording a gain of 27 cents a share from selling a recreation facility.

WCI earned $22.7 million in the year-ago quarter. Total revenue dropped 54% to $241.8 million from $527.7 million, as homebuilding revenue fell 62% and the number of unit orders plunged 83%. WCI wrote off $17.5 million on lower anticipated selling prices and the utilization of significant discounts and incentives to sell finished inventory.

I assume the news will probably get even worse from here out.

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