For Immediate Release
Chicago, IL – November 27, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Lennar (LEN), D.R. Horton (DHI), Wal-Mart (WMT), Target (TGT) and Deere & Company (DE).
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Here are highlights from Wednesday’s Analyst Blog:
New Home Sales Rise!
In even better news, inventories dropped by 4.4% on the month to 239,000, and are down by 37.1% from a year ago. Combined with the faster sales pace, this has dropped the months supply metric down to 6.7 months from 7.4 month in September — and from 11.1 months a year ago. This puts us within spitting distance of a normal level of inventories relative to sales, which is about 6 months.
During the bubble years inventory levels tended to hover around 4 months, but I doubt that we will be returning to those levels. In January, that metric topped out at 12.4 months as sales hit their low for the cycle on a seasonally adjusted basis of just 329,000. That puts new home sales up 30.7% from the bottom. That is a very nice rebound, but it was off a very low base.
New home sales peaked in mid-2005 at an annual rate of almost 1.4 million. It will be a very long time before we see those levels again. On the other hand, the big homebuilders like Lennar (LEN) and D.R. Horton (DHI) have been very cautious on starting new homes. In October, starts fell by 10.6% and were down 30.7% year over year. If these companies continue to be cautious, we might get back down to that 4.0 months of supply level sooner than I think.
Initial Jobless Claims Plunge
The good news did not stop with the initial jobless claims data. Regular state level continuing initial jobless claims for unemployment insurance fell by 190,000 to 5.423 million. Those claims run out after 26 weeks. After that, people are moved to federally funded extended initial jobless claims (part of the Stimulus Package), so the continuing claims number does not tell the whole story.
Combining the two largest of the Federal programs, there are an additional 4.179 million people who are getting unemployment benefits. That figure, though, also declined this week, falling by 18,250.
Since the extended benefit program was recently extended, it seems that this is actual good news — news that some people are actually finding new jobs, rather than simply running out of time for even the extended benefit program. That is very good news indeed. People with new jobs are going to have a much more upbeat view of the world. They are much more likely to go out and shop at Wal-Mart (WMT) or Target (TGT) this holiday season. From the point of view of the nation’s retailers, this news could not have come at a better time.
Still, this is no time to get complacent on the jobs front. We still have an unemployment rate of 10.2%, and as of October, we were still losing about 200,000 jobs a month. Further, once people have lost their jobs they are staying unemployed for longer than ever before, or at least since records of unemployment duration have been kept. I’m sure it was worse in the Depression, but the data cannot tell us exactly how much worse.
No Change in Deere’s Outlook
Deere & Company (DE) reported fiscal fourth quarter earnings of 23 cents per share (excluding goodwill impairment charges of 76 cents per share), which is well above the Zacks Consensus Estimate of 5 cents per share. However, quarterly earnings were down 72% year over year, primarily due to a double-digit decline in sales.
Quarterly revenue of $5.3 billion was down 28% from the prior-year period. Net sales from the company’s worldwide equipment operations dropped 30% year over year to $4.7 billion due to lower shipment and production volumes. Equipment net sales in the U.S. and Canada fell 26%, while the net sales outside the U.S. and Canada were down 35%.
Agriculture & Turf segment sales fell 26% due to lower shipment volumes, partially offset by improved price realization. The segment’s operating profit (excluding the goodwill impairment charge) was $389 million, compared to $460 million last year. Lower operating profit was driven by lower revenue, partially offset by a decline in raw material and SG&A expenses.
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