The pain in the housing sector just keeps getting worse. The latest sting came today from homebuilder Toll Brothers (TOL). The company lost $114 million in its fiscal fourth quarter, or a loss of 68 cents per share. Write downs on the value of its land holdings, along with staff reductions, were responsible for much of the huge loss.
Still, revenue for the quarter dropped 30% to $486.6 million, from $691.1 million in the same quarter a year ago. The Street was anticipating revenue of $450.1 million and a loss of 46 cents per share.
In an attempt to ameliorate the negative impact of the company’s dismal earnings miss, Toll Brother’s said “the debate about the economy and the housing industry seems no longer to be focused on whether we have seen the bottom, but rather, when and how quickly the economy and the housing market will recover.”
While this statement may be correct, it doesn’t mean investors are taking this statement to heart. In fact, the opposite was true in Thursday trade. TOL shares sank nearly 7% midway through the session. The stock was already down over 9% year to date, and that was before today’s sell-off.
The one bright spot for Toll Brothers here is that it has seen a significant rise (42%) in new contracts. Last month the company also reported a jump in new orders, while saying that its cancellation rate for the quarter was just 6.9%. Toll said that this cancellation rate was now in line with pre-recession historical averages.
The reality here is that the pain continues for the housing sector, and no amount of positive spin, and/or looking on the few bright sides of this issue, is going to help homebuilders extricate themselves from their current slump anytime soon.
Investors looking to trade this beaten-up market segment might want to do so via put options or by short selling TOL stock and other stocks in the housing sector.
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