Pulte Profit, Orders Drop

Pulte Homes(PHM Quote - Cramer on PHM - Stock Picks), continuing to be hurt by a slowing U.S. housing market, reported a drop in second-quarter earnings and a 30% decline in new orders Wednesday. The homebuilder also cut its guidance once again for the year.

Pulte's earnings from continuing operations fell to $243.9 million, or 94 cents a share, from $305.2 million, or $1.16 a share, a year earlier. Analysts expected earnings from continuing operations of 90 cents a share, according to Thomson First Call.

Net income, which includes losses from discontinued operations, fell to $243 million, or 94 cents a share, from $303.7 million, or $1.16 a share.

Revenue rose 3% from last year to $3.36 billion, beating analyst estimates of $3.30 billion.

However, new orders -- a key predictor of a homebuilder's future growth prospects -- fell to 9,455 homes from 13,581 a year earlier. Pulte's backlog was valued at $6.9 billion at the quarter's end, compared with a value of $7.8 billion a year earlier.

Pulte slashed its 2006 earnings projection to $4 to $4.30 a share, down from the guidance it gave in early June of $4.70 to $5 per share. Analysts, on average, had forecast a profit of $4.44 a share.

"Our second quarter results reflect the changing dynamics being experienced in the homebuilding industry," Richard J. Dugas Jr., Pulte's CEO, said in a statement. "After several years of limited house inventory and robust demand, the supply of homes for sale continues to increase, while greater buyer uncertainty about purchasing a home at this time is being further impacted by their inability to sell existing homes and the effect higher prices and interest rates are having on overall affordability."

The company experienced a 270-basis-point decline its gross margin to 21.1% in the quarter, partially dragged down by a $62 million write-off resulting from adjustments to land inventory and land held for sale. This charge includes the write-off of depositions and pre-acquisition costs association with land transactions the company no longer plans to pursue.