May 16, 6:09 PM EDT
Housing posts surprising rebound in April on apartment construction, outlook still shaky
By MARTIN CRUTSINGER
AP Economics Writer
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WASHINGTON (AP) -- Construction of new homes increased by the biggest percentage in more than two years in April, a rare spot of good news amid the worst downturn in housing in more than two decades.
Analysts, however, played down the increase, noting that all the strength came from the volatile apartment sector. They said the painful housing slump is far from over as a record flood of foreclosures continues to add to the sizable stockpile of unsold homes.
The Commerce Department reported Friday that housing construction rose by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units. While apartment construction rose by 36 percent, building in the much larger single-family sector of the market fell by 1.7 percent, the 12th consecutive monthly decline, pushing single-family activity down to a 16-year low.
"It is definitely too early to uncork the champagne on the long and winding road to more healthy housing-market conditions," said Brian Bethune, an economist at Global Insight. He said he did not expect housing activity to stabilize until the end of this year.
Len Blum, managing director of investment bank Westwood Capital, said the slump in housing will run for another year because of a number of problems, from banks tightening up on lending standards to the reluctance of many people to commit to a home purchase at a time when home prices are still falling.
"I think estimates that we are near the bottom of the housing correction will prove to be overly optimistic," he said. "We have had a housing bubble and it will take some time to deflate."
The prolonged two-year slump in housing is occurring after a five-year boom which pushed sales and home prices up to record levels. The correction has proven to be a serious drag on the overall economy, raising worries that the country could be in danger of falling into a recession.
A second report Friday showed that consumer confidence, as measured by a University of Michigan/Reuters survey, fell to a 28-year low of 59.5 in a preliminary reading for May, down from 62.6 in April. The drop was blamed in part on rising concerns about higher gas and food prices.
Concerns about falling consumer confidence and another spike in oil prices, to a new trading record of $127.82 a barrel, dampened investors' moods on Friday. The Dow Jones industrial average fell 5.86 points to close at 12,986.80.
Applications for building permits, considered a good sign of future activity, recorded an increase in April, rising by 4.9 percent to 978,000 units. It was the first gain in permits in five months but it still left permits 20 percent below where they were a year ago.
Economists said housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes, a challenge amid the current economic weakness.
"The demand for new homes still is quite weak, the overhang of vacant housing units is at record proportions, consumer sentiment continues to fall and the economy has been losing jobs since the end of last year," said David Seiders, chief economist at the National Association of Home Builders.
He said the economic fundamentals point to continued weakness in the single-family market for the rest of this year.
The troubles in housing sparked a severe credit crisis that erupted last August as major financial institutions began reporting multibillion-dollar losses on investments in securities backed by subprime mortgages, loans made to borrowers with weak credit histories.
Treasury Secretary Henry Paulson said Friday that he believed financial markets are "considerably calmer" now than they were in March, when the credit crisis claimed its biggest victim with the near-collapse of Bear Stearns, the nation's fifth largest investment bank. He predicted that the 130 million stimulus payments being made now to taxpayers will help overcome all the other problems holding the economy back.
"The fiscal stimulus will provide support to the economy as we weather the housing correction, capital markets turmoil and higher energy and food prices," he told an audience of business executives in Washington.
The Treasury Department reported that over the past three weeks, the government has made 45.5 million payments totaling $40.8 billion. Paulson said Friday that the aim is to have nearly $100 billion distributed to 130 million households by the middle of July.
The housing report showed that construction activity was up in most regions of the country in April, rising by 24.4 percent in the Midwest, 18.5 percent in the West and 3.6 percent in the South. However, construction fell by 12.7 percent in the Northeast.
Even with the improvement in April, housing construction nationwide was 30.6 percent below the level of activity a year ago.
Saturday, May 17, 2008
Demand lifts Deere's 2Q profit by 22 pct, warns of cost pressures
Global demand lifts ag machinery maker Deere's 2Q profit by 22 pct, warns of cost pressures
AP answers your news questions, from homegrown oil to global warming and the Earth's rotation
ST. LOUIS (AP) -- Deere & Co., the world's biggest maker of farm machinery, said Wednesday its second-quarter profit rose 22 percent, propelled by lofty crop prices that stoked global demand for its farm equipment despite a faltering U.S. economy.
But the Moline, Ill.-based company warned that rising costs of such raw materials as steel could cut into its earnings over coming months, sending its shares down nearly 10 percent Wednesday. Deere also said it was seeing spot parts shortages "cropping up."
The maker of tractors and harvesting machinery said its profit for the period ended April 30 jumped to $763.5 million, or $1.74 per share, up from $623.6 million, or $1.36 per share, during the same period last year.
Deere said sales rose to $8.1 billion from $6.9 billion a year ago. The company said its sales outside North America soared 46 percent during the quarter, dwarfing the 6 percent jump of its sales in the U.S. and Canada.
Analysts surveyed by Thomson Financial had expected earnings of $1.75 per share on sales of $7.6 billion. The earnings estimates typically exclude one-time items.
Although Mike Mack, Deere's chief financial officer, told analysts during a conference call the sales and earnings were the company's highest ever for any quarter, Deere's shares slid as some analysts wondered aloud whether Deere had lost some momentum.
"Deere had really been leaping over earnings estimates for years, and that came to an end today," said Matt Collins, an analyst at St. Louis-based Edward Jones. "It was a good solid quarter, but investors were looking for more."
Deere has benefited from higher farm prices around the world that have been fueled by increased ethanol production, and farmers benefiting from higher grain commodity prices are upgrading their equipment. Deere also is enjoying an export boom as the dollar's decline overseas makes its products cheaper in most markets beyond North America.
The company said it expects third-quarter and full-year sales to rise about 20 percent, sticking with what some analysts consider its conservative forecast that earnings would be $550 million to $575 million during this quarter and about $2.2 billion for the full year. Analysts surveyed by Thomson Financial were expecting earnings of $650 million for the third quarter, about $2.3 billion for the full year.
But Mack told analysts that the cost of raw materials were "racing ahead well beyond what we anticipated," and shortages of various parts and components "are cropping up from time to time" despite suppliers' best efforts.
For the first six months of the fiscal year, Deere said it earned $1.13 billion, or $2.56 per share, on $13.3 billion in sales. That compared with $862.3 million , or $1.88 per share, on $11.3 billion in sales a year earlier.
While crediting Deere with keeping its earnings guidance unchanged for the rest of the year, Collins said the company's tendency to be "pretty darn conservative here for the last couple of years" helped it consistently top Wall Street's estimates. Now, he said, "I think investors now are wondering if it's over."
Deere also makes construction and forestry equipment such as backhoes, excavators, riding mowers and leaf blowers.
"There's no doubt the ag business has the wind at its sales, but the rest of the company is fighting the housing recession here, a weakening U.S. economy that may or may not be in a recession," Collins said. "But the ag story is still very bullish globally, and everybody knows it. That's why (Deere's) stock had performed so well, and that's why expectations were running so high."
Deere's shares fell $8.94, or 9.9 percent, to $81.25. They are still closer to the upper end of their 52-week range of $56.50 to $94.89.
AP answers your news questions, from homegrown oil to global warming and the Earth's rotation
ST. LOUIS (AP) -- Deere & Co., the world's biggest maker of farm machinery, said Wednesday its second-quarter profit rose 22 percent, propelled by lofty crop prices that stoked global demand for its farm equipment despite a faltering U.S. economy.
But the Moline, Ill.-based company warned that rising costs of such raw materials as steel could cut into its earnings over coming months, sending its shares down nearly 10 percent Wednesday. Deere also said it was seeing spot parts shortages "cropping up."
The maker of tractors and harvesting machinery said its profit for the period ended April 30 jumped to $763.5 million, or $1.74 per share, up from $623.6 million, or $1.36 per share, during the same period last year.
Deere said sales rose to $8.1 billion from $6.9 billion a year ago. The company said its sales outside North America soared 46 percent during the quarter, dwarfing the 6 percent jump of its sales in the U.S. and Canada.
Analysts surveyed by Thomson Financial had expected earnings of $1.75 per share on sales of $7.6 billion. The earnings estimates typically exclude one-time items.
Although Mike Mack, Deere's chief financial officer, told analysts during a conference call the sales and earnings were the company's highest ever for any quarter, Deere's shares slid as some analysts wondered aloud whether Deere had lost some momentum.
"Deere had really been leaping over earnings estimates for years, and that came to an end today," said Matt Collins, an analyst at St. Louis-based Edward Jones. "It was a good solid quarter, but investors were looking for more."
Deere has benefited from higher farm prices around the world that have been fueled by increased ethanol production, and farmers benefiting from higher grain commodity prices are upgrading their equipment. Deere also is enjoying an export boom as the dollar's decline overseas makes its products cheaper in most markets beyond North America.
The company said it expects third-quarter and full-year sales to rise about 20 percent, sticking with what some analysts consider its conservative forecast that earnings would be $550 million to $575 million during this quarter and about $2.2 billion for the full year. Analysts surveyed by Thomson Financial were expecting earnings of $650 million for the third quarter, about $2.3 billion for the full year.
But Mack told analysts that the cost of raw materials were "racing ahead well beyond what we anticipated," and shortages of various parts and components "are cropping up from time to time" despite suppliers' best efforts.
For the first six months of the fiscal year, Deere said it earned $1.13 billion, or $2.56 per share, on $13.3 billion in sales. That compared with $862.3 million , or $1.88 per share, on $11.3 billion in sales a year earlier.
While crediting Deere with keeping its earnings guidance unchanged for the rest of the year, Collins said the company's tendency to be "pretty darn conservative here for the last couple of years" helped it consistently top Wall Street's estimates. Now, he said, "I think investors now are wondering if it's over."
Deere also makes construction and forestry equipment such as backhoes, excavators, riding mowers and leaf blowers.
"There's no doubt the ag business has the wind at its sales, but the rest of the company is fighting the housing recession here, a weakening U.S. economy that may or may not be in a recession," Collins said. "But the ag story is still very bullish globally, and everybody knows it. That's why (Deere's) stock had performed so well, and that's why expectations were running so high."
Deere's shares fell $8.94, or 9.9 percent, to $81.25. They are still closer to the upper end of their 52-week range of $56.50 to $94.89.
Sony swings to profit
Sony swings to profit in January-March quarter on way to record year, expects drop this year
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TOKYO (AP) -- Sony punctuated its recovery by swinging to a profit for the January-March quarter from a loss a year ago on its way to a record performance for the fiscal year as it reduced losses from its PlayStation 3 video game business.
Strong sales of flat panel TVs and digital cameras also helped nearly triple annual profit compared with the previous financial year, the electronics and entertainment company said Wednesday.
But Sony joined Japanese automakers Toyota Motor Corp. and Honda Motor Co. in forecasting lower profit for the fiscal year through March 2009, citing the strong yen's erosion on overseas earnings.
Sony Corp. had been battered by a recent fall in gadget prices and the bumpy start of its PlayStation 3 game home console, which required enormous startup costs and struggled against the Wii from rival Nintendo Co.
The last time Sony had a record annual profit was a decade ago, said Chief Financial Officer Nobuyuki Oneda.
For the fiscal fourth quarter, Sony posted a profit of 29 billion yen ($277 million), a reversal from a loss of 67.6 billion yen in the same period last year.
For the financial year through March, Sony earned a better-than-expected profit of 369.4 billion yen ($3.5 billion), a record for the company known for its Walkman portable players and "Spider-Man" movies. That's nearly triple the 126 billion yen earned in the previous fiscal year.
Quarterly sales dropped 6.5 percent to 1.95 trillion yen ($18.6 billion). Sales were solid in liquid-crystal display TVs, digital cameras and Vaio computers, the Tokyo-based manufacturer said. But sales of mobile phones, old-style picture tube TVs and PlayStation 2 machines declined.
For its quarterly operating performance, which measures how a company did in its core operations, Sony lost 4.7 billion yen ($44.9 million) although that was still an improvement from a much larger operating loss of 113 billion yen in the year ago period.
For the fiscal year through March 2009, though, Sony expects profit to slide 21.5 percent to 290 billion yen ($2.8 billion as sales edge up just 1 percent to 9 trillion yen ($86 billion).
The biggest obstacle is the unfavorable currency swings that are expected in months ahead, the company said.
Sony is expecting the dollar to trade at about 100 yen for the current fiscal year. The dollar, which traded at an average of about 114 yen last year, fell below 100 yen earlier this year and is now trading around 105 yen.
Sony still expects the PS3 business to become profitable sometime in the fiscal year ending March 2009, it said.
Sales in its movies unit declined 11 percent in the fiscal year ended March 31, because fewer films were released compared with the previous year.
Releases for the fiscal year just ended that contributed to theater and home entertainment revenue included "Spider-Man 3" and "Superbad," according to Sony.
Sony's music business in Japan fared better compared with the previous year, boosted by best-selling albums. Sony's results reflect its equity holdings in major joint ventures, such as Sony BMG Music Entertainment, which saw success with Avril Lavigne's "The Best Damn Thing" and Alicia Keys' "As I Am" hit albums.
But equity-related income declined on year from Sony Ericsson Mobile Communications AB because of greater research and development costs, it said.
Sony's latest results were improved by the sale of assets, including its former headquarters in Tokyo, and the absence of expenses for a massive battery recall that hit the previous year.
In the previous year, Sony recalled millions of lithium-ion laptop batteries suspected of defects that caused them to burst into flames in some cases.
Sony shares rose 1.3 percent to close at 4,850 yen ($46) on Wednesday. The earnings were announced shortly after the stock exchanged closed.
Latest Earnings News
BT profit falls 6.2 pct in 4Q as costs rise, wholesale customers move to broadband services
Sony swings to profit in January-March quarter on way to record year, expects drop this year
Hitachi loss for fiscal year widens to $560M on sluggish plasma TV sales in US
HP 2nd-quarter preliminary earnings beat expectations, raises full-year financial targets
NTT's fiscal year profit jumps 32 percent on solid long distance, international service
AP answers your news questions, from homegrown oil to global warming and the Earth's rotation
TOKYO (AP) -- Sony punctuated its recovery by swinging to a profit for the January-March quarter from a loss a year ago on its way to a record performance for the fiscal year as it reduced losses from its PlayStation 3 video game business.
Strong sales of flat panel TVs and digital cameras also helped nearly triple annual profit compared with the previous financial year, the electronics and entertainment company said Wednesday.
But Sony joined Japanese automakers Toyota Motor Corp. and Honda Motor Co. in forecasting lower profit for the fiscal year through March 2009, citing the strong yen's erosion on overseas earnings.
Sony Corp. had been battered by a recent fall in gadget prices and the bumpy start of its PlayStation 3 game home console, which required enormous startup costs and struggled against the Wii from rival Nintendo Co.
The last time Sony had a record annual profit was a decade ago, said Chief Financial Officer Nobuyuki Oneda.
For the fiscal fourth quarter, Sony posted a profit of 29 billion yen ($277 million), a reversal from a loss of 67.6 billion yen in the same period last year.
For the financial year through March, Sony earned a better-than-expected profit of 369.4 billion yen ($3.5 billion), a record for the company known for its Walkman portable players and "Spider-Man" movies. That's nearly triple the 126 billion yen earned in the previous fiscal year.
Quarterly sales dropped 6.5 percent to 1.95 trillion yen ($18.6 billion). Sales were solid in liquid-crystal display TVs, digital cameras and Vaio computers, the Tokyo-based manufacturer said. But sales of mobile phones, old-style picture tube TVs and PlayStation 2 machines declined.
For its quarterly operating performance, which measures how a company did in its core operations, Sony lost 4.7 billion yen ($44.9 million) although that was still an improvement from a much larger operating loss of 113 billion yen in the year ago period.
For the fiscal year through March 2009, though, Sony expects profit to slide 21.5 percent to 290 billion yen ($2.8 billion as sales edge up just 1 percent to 9 trillion yen ($86 billion).
The biggest obstacle is the unfavorable currency swings that are expected in months ahead, the company said.
Sony is expecting the dollar to trade at about 100 yen for the current fiscal year. The dollar, which traded at an average of about 114 yen last year, fell below 100 yen earlier this year and is now trading around 105 yen.
Sony still expects the PS3 business to become profitable sometime in the fiscal year ending March 2009, it said.
Sales in its movies unit declined 11 percent in the fiscal year ended March 31, because fewer films were released compared with the previous year.
Releases for the fiscal year just ended that contributed to theater and home entertainment revenue included "Spider-Man 3" and "Superbad," according to Sony.
Sony's music business in Japan fared better compared with the previous year, boosted by best-selling albums. Sony's results reflect its equity holdings in major joint ventures, such as Sony BMG Music Entertainment, which saw success with Avril Lavigne's "The Best Damn Thing" and Alicia Keys' "As I Am" hit albums.
But equity-related income declined on year from Sony Ericsson Mobile Communications AB because of greater research and development costs, it said.
Sony's latest results were improved by the sale of assets, including its former headquarters in Tokyo, and the absence of expenses for a massive battery recall that hit the previous year.
In the previous year, Sony recalled millions of lithium-ion laptop batteries suspected of defects that caused them to burst into flames in some cases.
Sony shares rose 1.3 percent to close at 4,850 yen ($46) on Wednesday. The earnings were announced shortly after the stock exchanged closed.
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