Number-one U.S. homebuilder Centex said Friday it will take almost $1 billion in charges for its fiscal Q2, saying the housing market continues to be "extremely difficult." Orders for the quarter will drop 13% to 5,953 units, while sales will fall 14% to 7,350 units, the company said in a preliminary earnings announcement. "These adjustments reflect the market's further deterioration over the quarter and the significant effects of the mortgage-market disruptions," CEO Timothy Eller said (see FQ1 earnings call transcript). The $1 billion charge includes an $850M impairment on its land inventory and a $65M goodwill impairment. On Thursday, Moody's cut Centex's investment grade debt to junk status, along with that of Lennar and Pulte Homes. It said it foresees extremely weak industry conditions through at least 2009, "with any sector recovery likely to be listless for some time after that." It said Centex has had a hard time unloading excess inventory, faces rapidly declining home deliveries and revenue generation, and has close to a seven-year lot supply. In an Oct. 1 note, Citigroup told investors, "While we don’t expect any of the builders to move much lower over the near term, we expect the larger-cap builders and those with the strongest balance sheets to benefit most from any near-term bounce -– much as they did coming out of the 1990 trough." Centex shares are down 3.2% to $28.50 in pre-market activity.
Commentary: Another Absurd Homebuilder Rally • Citigroup Upgrades Four Homebuilders In Attempt To Call Bottom • A Bullish Call On Philly’s Housing Sector Index
Stocks to watch: CTX. Competitors: DHI, LEN, PHM, TOL
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