At IBS: The case for double-digit growth
Orlando, Fla. — The official housing forecast from the National Association of Home Builders (NAHB) is similar to last year’s forecast — with pent-up demand and improving demographics pointing toward growth in the double-digit percentages.
The problem: Last year’s forecast was — to put it mildly — overly optimistic. During the International Builders’ Show here in Orlando, the NAHB’s chief economist David Crowe explained what’s different this year and why he thinks a 16% increase in single-family housing starts is likely.
"I’m not saying we’re going to have a banner year; I’m saying we’re going to have a better year," Crowe told a crowded conference room of builders and vendors.
Single-family starts are forecast to reach 499,000 in 2012, a 16% increase over the record low 429,000 in 2011. One year later, the NAHB forecasts 660,000 single-family starts.
The scenario for double-digit growth begins with improving macro-economic signals. Gross domestic product is improving. Employment gains show improving. Consumer confidence that languished at 46 in September grew to 64.8 in December, according to the Conference Board. In January, however, confidence dipped to 61.1.
Most dramatically in favor of growth is a relatively new metric in the NAHB’s quiver: the NAHB/First American Improving Markets Index. In September 2011, the index showed 12 markets improving. The February metric shows 98 growth markets.
A year ago, the NAHB’s 2012 forecast follows a 2011 forecast that called for 575,000 single-family starts, which was off by 146,000.
Like last year, the NAHB’s forecast was generally endorsed by Frank Nothaft, chief economist for Freddie Mac.
"We’re coming off a very low number," Crowe said, referring to 2011’s single-family starts figure that was the lowest since the government began keeping track in 1959. "Things are going to get better, not grand. And some places are going to get better than others."
Beacon posts increase in Q1 income
Beacon Roofing Supply has posted first-quarter net income of $19.1 million compared with $10.1 million in the year-ago quarter. The company cited higher sales and gross margin rate, partially offset by the impact from higher operating expenses and a higher income tax provision for the increase.
Total sales for the first quarter ended Dec. 31, 2011, totaled $489.9 million, up 21% from $404.8 million in the same quarter a year ago.
Residential and non-residential roofing product sales increased 25.4% and 15.5%, respectively, while complementary product sales declined 2.6%. First-quarter roofing sales benefited from increased re-roofing activities, which resulted from improved weather conditions and stronger business in markets that experienced storms, and higher average selling prices.
"We began fiscal 2012 with a very strong first quarter. Most of our geographic regions exceeded our expectations by achieving double-digit sales percentage increases and significant operating income growth,” said Paul Isabella, president and CEO. “We continue aggressively to seek quality companies that fit our target acquisition profile, such as Fowler & Peth, which we acquired in the first quarter. We are encouraged by our strong start to fiscal 2012 and expect to continue our steady growth."
PulteGroup builds a better Q4
Bloomfield Hills, Mich.-based PulteGroup reported fourth-quarter net income of $14 million, compared with a net loss of $165 million in the prior-year quarter.
Revenue from home sales in the fourth quarter ended Dec. 31, 2011, totaled $1.2 billion, up 1% over the prior year’s fourth quarter. The increase in revenues was driven by a 3% increase in average selling price to $271,000, which was partially offset by a 2% decrease in closings to 4,303 homes.
For the quarter, the PulteGroup reported 3,084 net new orders. Prior-year orders of 3,044 reflect a one-time pick up of 200 signups, which resulted from a change in the company’s order recognition process. Excluding those orders, the home builder saw a year-over-year increase in orders of 8%.
"We are pleased to report PulteGroup’s fourth-quarter earnings, which demonstrate the company’s continued progress on our initiatives to expand margins and lower overhead costs," said Richard Dugas Jr., chairman, president and CEO of PulteGroup. "In addition to our improved operating results, we also successfully sold 23 non-strategic land assets for $64 million and were able to repurchase $257 million par value of our debt for $252 million. These transactions continue to strengthen our balance sheet and will help to improve our return on invested capital over time.”
For the year ended Dec. 31, 2011, PulteGroup reported a net loss of $210 million, compared with a net loss of $1.1 billion in the prior year.
Revenues from home sales for the period totaled $4.0 billion, compared with revenues of $4.4 billion in the prior year. Lower revenues for the period were driven primarily by an 11% decrease in closings to 15,275 homes.