Earnings and home sales data this week

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Monday - AAPL and OCN a subprime servicer.


Tuesday - AMZN, AMTD, CAV Cavalier Homes, CTX Centex Homes, and UPS.


Wednesday - CME, FNF Fidelity National Title, MDC aka Richmond American Homes, MER, NCC National City Bank, PHM Pulte Homes and RYL Ryland Homes.


Thursday - BLDR, BMHC, GNW, MSFT, MOT (a Cramer favorite) and SPF Standard Pacific Homes.


Friday - BHS Brookfield Homes, CFC before market open and MTH Meritage Homes.





Wednesday has existing home sales and it is expected to be 5.25mil.





Thursday has new home sales and it is expected to be 780k. But this number is useless since it is contracts and not actual sales and when we get the cancellation rates from the builders it will be a lot worse. Also jobless claims for the week are expected at 344k.





Friday is consumer sentiment and is expected to be 82.





Most of the builders have warned it will be ugly but it is more about how their balance sheets look. They have been burning cash like no other and I am curious to see who burned the most last quarter.





Thoughts, opinions and did I miss any other really good ones?
 
Amazon and UPS will tell us a lot about the state of consumer spending. If their conference calls indicate downward guidance for the next few quarters, I think a recession becomes self-evident. The builders are all gonna suck, but I don't think that comes as a shock to anyone here. Also, expect CFC to trot out some dog-and-pony show to distract people from the desolation of the quarterly report.
 
The ER so far comparing to last quarter is -0.1% with 24% of the companies reported. Earlier this month I said a pull back may happen either the end of this year or begining of next year. I think the pull back may happen this month due to the poor earning report. Furthermore, because JP bank is set to raise rate and EU/AU/NZ banks are holding rate steady, my position on seeing a bull market next year has been weakened significantly. I think we may get into a recession soon, too bad I won't be here for the fireworks
 
<a href="http://tinyurl.com/2ldonu">UPS saw modest growth</a>.





"Once again, UPS's balanced network around the globe produced solid results even in the face of a lackluster U.S. economy," said Scott Davis, UPS's vice chairman and CFO. "Fourth quarter results will be driven by good performance in our international operations and further gains in supply chain and freight. We expect slowing retail sales will restrain U.S. domestic volume growth. For the full year, we expect adjusted diluted earnings per share to be between $4.13 and $4.19, well within the range we provided at the beginning of 2007."
 
<a href="http://tinyurl.com/3chhp7">Ameritrade did really well</a>.





Amazon is coming up next. The options trading was huge today on the calls.
 
I am interested to see the housing numbers (sales). September was the first full month after the unwinding of the credit ponzi scheme. I think it is going to be a shitstorm to tell you the truth.
 
<a href="http://tinyurl.com/3e3apq">Centex's numbers look awful</a>.





Highlights of the quarter ended Sept. 30, 2007 (compared to last year's second quarter):

<pre> -- Loss from continuing operations was $5.26 per diluted share
-- Sales (orders) decreased 13% to 5,953
-- Reduced homebuilding SG&A expenses by 21% or $80 million
-- Reduced inventory of unsold homes by 28% to 4,708
-- Homebuilding cancellation rate decreased 200 bps to 35.4%



</pre>

"Market conditions were extremely challenging during the quarter, reflecting the serious disruptions in the credit and mortgage markets that occurred during that period," said Tim Eller, Centex Corporation chairman and CEO. "In response, we meaningfully reduced prices in order to improve affordability for our home buyers. These actions were consistent with our continued focus on selling homes and generating cash as we structure for profitability."

CORPORATE RESULTS

Fiscal 2008's second quarter revenues were $2.22 billion, 21% lower than the same quarter last year. The loss from continuing operations for the second quarter was $644 million, or a loss of $5.26 per diluted share, down from earnings of $80 million, or $0.65 per diluted share, in the previous year's fiscal second quarter.

HOME BUILDING

Fiscal 2008's second quarter revenues were $2.11 billion, 21% lower than the same quarter last year mainly as a result of a 14% decrease in closings to 7,350 homes. Home building reported an operating loss of $953 million for the quarter, after $983 million, or $4.97 per diluted share, in impairments and other land charges. Housing operating earnings (housing revenues less housing cost of sales and SG&A) were $26 million, down from earnings of $259 million in the previous year. The decrease is a result of lower unit volume, an 8% decrease in the unit average sales price and higher sales incentives.

For the current six months, revenues were $3.91 billion, 26% lower than the same period last year. The reported homebuilding operating loss was $1.12 billion for the six-month period this year versus earnings of $461 million in the same period last year.
 
<p>Assuming I am reading the numbers right...someone is going spin the last three items (decreased costs, reduced inventory, and lower cancellation rate) as a good thing and pump up the stock.</p>

<p> </p>
 
Scary numbers from Centex:





This is the amount of units in backlog/sales orders for the Southwest 2007 - 1085 and 2006 - 1052 +3%.





This is the dollar amount they are worth for the Southwest 2007 - $540.4mil and 2006 - $1.311bil -59%.





So they have slightly more units than they did last year but what those sales are worth is 59% less. I can't imagine that the product type could shift that drastically so that is really an amazing drop.





<em>Tim Eller, Centex Corporation chairman and CEO. "In response, we meaningfully reduced prices in order to improve <strong>affordability</strong> for our home buyers. These actions were consistent with our continued focus on selling homes and generating cash as we structure for profitability."</em>





Sadly not everyone understands that it is about affordability.
 
Existing home sales down 8% from the previous month. When I first heard this number, I was surprised, but then I remembered that it is only one month, and sales were already down the month before.
 
Yeah, here's a link to the 8% story:


<a href="http://news.yahoo.com/s/ap/20071024/ap_on_bi_ge/economy_14">


http://news.yahoo.com/s/ap/20071024/ap_on_bi_ge/economy_14</a>
 
<em>Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures.</em>





Why doesn't anyone ever blame prices being too high?





<em>However, many private economists believe that the Federal Reserve, which cut a key interest rate for the first time in four years last month, will continue cutting rates in a campaign to make sure that the weakening economy does not tumble into a full-blown recession.</em>





How nice of them.
 
<p><em>However, many private economists believe that the Federal Reserve, which cut a key interest rate for the first time in four years last month, will continue cutting rates in a campaign to make sure that the weakening economy does not tumble into a full-blown recession.</em>





<em>How nice of them.</em> </p>

<p>Of course, we might fall into full-blown inflation but at least we did not fall into a full-blown recession. . . wait a second. . . </p>
 
<p>jwbrown, all of this makes sense once you watch the money as debt video. prices will only keep going up forever and ever and ever.</p>

<p> </p>
 
I understand why they're doing it, but it doesn't make it right.





It's a shame we've decided to whore ourselves to the rest of the world so Mr. Hedgie can buy his private island in the Pacific.
 
I think Mr. Hedgie is in a world of hurt at the moment. When he sooner or later has to Mark to Market all the crud on his books that he does not have to disclose, his hedge fund will go "Poof". If Merrill Lynch took a 8 Billion dollar hit. I just wonder what the Hedge Fund exposure to all the bad paper really is ? Bet its HUGE ! The card has yet to be played in this credit unwind.
 
Here is the MW article on the Centex conference call. <a href="http://tinyurl.com/245w5p">Centex cuts prices in response to the mortgage turmoil</a>. I will listen to the call after the market closes. Usually some analyst will ask a great question that the MSM doesn't understand so they don't quote it.





As for the hedgies going bust it depends on the the hedge fund. If the hedge fund is smart like Paulson and shorted the crap out of the MBS markets you are up big time. Of course if you were bullish on MBS then you are screwed and you will end up like <a href="http://youtube.com/watch?v=LtcnXLDnXvs">this guy.</a>
 
<p>I found this over @ the HP site and I am blown away that I did not know this.</p>

<p>When calculating the sales number they use the NEW SEASONAL PACE compared to the PREVIOUS SEASONAL PACE. In other words as of August 31st we were "on pace" to hit 5.38 Million sold units by dec 31st. As of September 30th we were only on pace to sell 5.04 million units. So according to the NAR the pace of existing home sales slowed by only 8%! Talk about twisting the numbers, this makes me want to vomit!</p>

<p>Here are the actual sales numbers for August and September....as posted by HP.</p>

<p>Sept 2007: 409,000 sales (down 29% versus last month, down 23% versus last year)


Sept 2006: 529,000 sales


August 2007: 575,000 sales</p>

<p>That's like saying a baseball player's "estimated season-ending batting average fell from .325 to .310, for the month of september when his actual batting average for the month of september was only .250</p>

<p> This is extraordinary my friends. Am I the only one that just realized this???</p>
 
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