For Immediate Release
Chicago, IL – January 28, 2010 – 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: Toll Brothers (TOL), D.R. Horton (DHI), Ford (F), Toyota (TM) and General Dynamics Corporation (GD).
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Here are highlights from Wednesday’s Analyst Blog:
New Home Sales Weak
The absolute level of inventories continues to decline, falling to 231,000 from 235,000 in November, and down 34.0% from the 350,000 level a year ago. Absolute inventory levels have declined for 12 straight months now. However, with the slower sales rate, the months of supply metric rose back up to 8.1 months. That is up from 7.6 months in November and an interim low of 7.1 months is October, but it is significantly better than the 12.4 month peak in January 2009, or the year-ago level of 11.2 months.
For the market to really be healthy, the month’s supply figure should be less than 6 months. During the bubble it was around 4 months, so that level is a sign of overheating.
The other bright spot was that there was a big month-to-month pick-up in both the median and the average sales price, with the median increasing by 5.2% on the month to $221,300 while the average was up 7.6% to $290,600. However, a year ago the median was $229,600, so it is down 3.6% year over year. The average was up 10.4% year over year.
Pricing for new homes, though, is less important than that of existing homes, since a decline does not wipe out the homeowner’s wealth the way a decline in existing home prices does. A decline in new home sales does not put the borrowers underwater and in danger of defaulting and foreclosure. However, a rise in selling prices is good news for the home builders like Toll Brothers (TOL) and D.R. Horton (DHI).
The level of new home sales is far more important to the overall economy than is the level of existing home sales. New home construction stimulates lots of economic activity, as the materials are used and the workers build them. Existing home sales simply transfer existing assets from one set of hands to another.
Think about it in relation to auto sales. Every month people closely watch for how many cars Ford (F) or Toyota (TM) are selling, but when was the last time you heard about the level of used car sales on the news? The same principal applies here.
Thus, the decline in new home sales is very bad news. Take a look at the relationship between the blue recession bars in the charts below and new home sales. New home sales tend to decline going into a recession and are a key locomotive pulling us out of a recession. It is looking more and more like this particular locomotive is derailed.
General Dynamics Shows Resilience
Before the opening bell, General Dynamics Corporation (GD) reported fourth-quarter EPS of $1.60, sweeping past the Zacks Consensus Estimate by 2 cents. However, it fell 2 cents short of the year-ago result.
In the reported quarter, the company witnessed weak demand for its Gulfstream business jets. However, the company was able to beat market expectations through strong demand from defense-related products.
General Dynamics’ fiscal 2009 earnings of $6.20 beat the Zacks Consensus Estimate of $6.19. However, it came two cents short compared to fiscal 2008 earnings of $6.22.
General Dynamics’ quarterly revenue grew 0.6% year over year to $7.9 billion. During the quarter, General Dynamics witnessed higher top line in Marine Systems (year-over-year growth of 12.4%), Combat Systems (6.6%) and Information Systems & Technology (2.8%). However, Aerospace fell 22.9% year over year. General Dynamics generated revenue of $32 billion in fiscal 2009, beating the fiscal 2008 revenue of $29.3 billion by 9.2%.
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