Beazer Homes Seeing Some Rays Of Hope

By Sham Gad | February 07, 2012 AAA

Beazer Homes (NYSE:BZH), one of the hardest hit homebuilders, reported a net profit for the first fiscal quarter of 2012. During the quarter, Beazer reported a net income of $.7 million, 1 cent per diluted share, compared with a loss of $48.3 million, or 65 cents per share in the fiscal first quarter of 2011. Revenue came in at $188.5 million, compared with $109 million in fiscal 2011.

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Hope in 2012
Analysts was expecting Beazer to post a loss of up to 40 cents a share in the quarter. So when Beazer reported that it swung back to profitability, albeit minimal, the market sent shares up almost 3% on the news. The next day, thanks to a favorable unemployment report, shares rose another 10%. What really pleased Wall Street is what Beazer's numbers said about the future: the total backlog from continuing operations at year end for 2011 was 1,307 homes with a sales value of $315.8 million, compared to 787 homes with a sales value of $198.0 million as of Dec. 31, 2010. Indeed, while Beazer is working with depressed numbers, such a strong surge in new orders suggests that there may be hope after all for housing in 2012.

Cautious Optimism
Encouraging signs from homebuilders along with recent news that the unemployment rate fell to 8.3% is a very encouraging start for the U.S. economy in 2012. But Beazer's good quarter is only a start. Yet investors can take comfort that the overall industry is starting to show signs of cautious optimism. Pulte Homes (NYSE:PHM), one of the Nation's largest homebuilders by market cap, saw orders climb by 8% year over year. Pulte also managed to swing to a profit in the fourth quarter of 2011 compared to a loss from a year ago.

Yet investors will want to see more good news in the quarters ahead, and not all homebuilders are turning profits. M/I Homes (NYSE:MHO) posted a net loss of $3 million. Still, that's a vast improvement from the loss of $11.1 million reported in the year ago quarter. Also, MDC Homes (NYSE:MDC), which has been more resilient during the housing crisis, lost $18.8 million in the fourth quarter of 2011 compared with a prior year loss of $30 million.

The Bottom Line
With housing starts sitting at historical lows, it's surpsiging to see homebuilders experiencing a boost in new orders. With shares prices sitting at the bottom of the barrel, good news provides an unexpected jolt. If Beazer and other homebuilders can put a string of solid quarters together, homebuilders could be in for a strong rally in 2012. (For related reading, see Economic Indicators: Housing Starts.)

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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

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