So, from current housing stock patterns it is not at all clear that the sector is dead. Then the WSJ reports on the pattern of UK housing stocks, ahead of us in the interest rate cycle, where fundamentals slowed but stocks recovered due to better management. KB Home reports quarterly results today after the market closes. Toll Brothers filed quarterly results on 10 Mar 2006 for the period ending 31 January 2006. Q/Q stockholder equity increased 6% despite some significant asset shifts and some minor liabilities changes. Y/Y revenue increased 29% ($1,278M/$989M), operating income increased 36% ($237M/$175M), and net income increased 49% ($163M/$110M). Quarterly Y/Y EPS increased 48% ($0.98/$0.66), showing a tiny bit of share dilution. That gives them a Y/Y slight OP margin increase from 18% to 19% (from $175M/$989M to $238M/$1278M).
The short story is that their model is better this year than last year - no sign of slowing - and their stock is half what it was. As far as we can tell, the stock decline is based on sentiment over the housing sector - fuzzy stories - rather than the cold hard numbers. We'll look for confirmation or contradiction of that from KB Home after today's close.