The Ryland Group is scheduled to release its earnings for 1Q2009 today after the market closes. Analysts are expecting the company to lose an average of about $1.02 per share for the quarter as sales revenues are anticipated to fall an average of 43.5% from a year ago.
However, some investors and analysts are expecting the company to handily beat those estimates if impairment trends hold true for Ryland; KB Home, Lennar Corp., and Meritage Homes, the first three public builders to report for the quarter, all experienced a significant drop-off in write-downs.
The new federal first-time home buyer tax credit coupled with interest rates under 5% should help sales rebound from the fourth quarter, which CEO Chad Dreier said was particularly brutal. “I must say I joined home building in April of 1977, so I have been in the business almost 32 years, and October and November were two of the slowest months I have ever experienced,” he told analysts during last quarter’s earnings call.
Closings should come in between 750 units, on the conservative end of the spectrum, and an optimistic 1,000 units, assuming that historical patterns hold true and the company closes on roughly half the homes it had in backlog at the end of the fourth quarter. At the end of December, the company counted 1,559 units in backlog, down 47.5% from the same period in 2007, for a value of roughly $407.1 million.
The first quarter could also mark the first time since 2007 that the company’s gross margins, including impairment charges, could move significantly into positive territory. At the end of 4Q2008, gross margins were 0.1%, including impairments.
As far as tomorrow’s earnings call goes, analysts likely will be clamoring for color related to the company’s joint venture with Oaktree Capital; any news that the venture has moved on any distressed asset purchases could serve as indication that the land market is thawing. However, given Oaktree’s historical penchant for investing in distressed debt, which accounts for roughly $16.2 billion of its $49.3 billion portfolio, the partnership is likely to be going after notes rather than actual land assets.
Moreover, tomorrow’s call likely will mark Dreier’s final appearance on an earnings call; company president and former COO Larry Nicholson is slotted to take over as the company’s chief executive May 29.
