Bloomfield MI, October 26, 2006--Pulte Homes said its third-quarter profit plunged 52 percent and came in below Wall Street expectations.
Pulte, the nation's No. 2 homebuilder by units behind D.R. Horton Inc., blamed the drop on costs related to land the company holds or was planning to purchase, as well as on the weak housing market.
Net income dropped to $190.2 million, or 74 cents per share, in the July-September period, from $395.4 million, or $1.50 per share, a year ago. The latest period reflects about $87.7 million of charges resulting from adjustments to land inventory and write-offs related to land deals Pulte has decided not to pursue.
Revenue fell 6 percent to $3.56 billion from $3.79 billion.
Earnings per share from continuing operations also were 74 cents. Analysts surveyed by Thomson Financial forecast earnings from continuing operations of 76 cents per share on $3.35 billion in sales.
For the first nine months of 2006, Pulte said it earned $695.9 million, or $2.69 per share, compared with $917.4 million, or $3.49 per share, in the same period last year. Nine-month revenues totaled $9.89 billion, compared with $9.56 billion in 2005.
Earlier Wednesday, the National Association of Realtors reported that existing home sales declined 1.9 percent in September to a seasonally adjusted sales pace of 6.18 million units, marking the slowest sales rate since January 2004.
The median price of an existing home also registered a sharp drop, from $225,000 in August to $220,000 last month. The median stood at $225,000 in September 2005.
The inventory of unsold homes held steady at 7.3 million in September, the Realtors group said. It stood at 4.6 million in September 2005.
Pulte said its average sales price per home rose 6 percent to $335,000, but closings decreased 11 percent to 10,440 homes.
Net new home orders were 7,299 homes, valued at $2.4 billion. That represents a roughly 40 percent decline from the third quarter last year.
"The operating landscape for new home sales remained challenging during the third quarter, as high inventory levels, affordability issues, elevated cancellation rates and a general lack of buyer confidence continued to weigh on new home demand," Richard J. Dugas Jr., president and chief executive, said in a news release.
The housing market has tipped in favor of buyers after several years of rapid inflation in home prices nationwide. A combination of higher interest rates, peak energy prices and stagnant wages, among other factors, have put the brakes on growth in the U.S. residential market.
"Quite simply, the housing market is burdened by a glut of sellers and shortage of buyers," said Peter Morici, a business professor at the University of Maryland.
"The speculative frenzy of recent years is causing a major adjustment," Morici said in an e-mail message. "Things are likely to get worse before they get better. The housing market will remain soft into next spring."
Looking ahead, the company said it expects fourth-quarter earnings of 30 cents to 70 cents per share, including potential pretax charges of up to $150 million for land inventory adjustments.
The company said its backlog as of Sept. 30 stood at 16,375 homes, or $5.8 billion-- well below the year-ago level of 23,666 homes, or $8 billion.
