Editor's note: "Bricks and Mortar" is a mock portfolio created by Senior Writer Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks.

Starwood Hotels

(HOT)

beat first-quarter earnings estimates before the opening bell Thursday, and the hotel operator raised its guidance for the year because of strong international operations. Shares rose 5% to $52.09 in recent trading Thursday morning.

Adjusted earnings per share were 44 cents, beating the consensus analyst estimate of 25 cents, according to Thomson Financial. Worldwide revenue per available room (Revpar), a key hotel operating metric, rose 8.4%, while North America remained weak at 2.9% growth.

For the year, Starwood increased its Revpar guidance to 8% to 10% worldwide (from 4% to 7%), and the company essentially kept the full-year EPS guidance intact, at $2.40 to $2.58.

The stock is now trading around 10 times trailing EBITDA, which is below the 12 times average multiple going back to 2001, according to data from SNL Financial.

Given Starwood's strong international growth platform and its propensity to use free cash flow to buy back shares (roughly 3% of the outstanding stock was repurchased by the firm in the quarter), I continue to like Starwood shares at these levels.

Homebuilders: Pulte, Ryland

The spring selling season is looking to be another dud for homebuilders.

Pulte Homes

(PHM) - Get Report

and

Ryland

(RYL)

both reported large quarterly losses, as expected, following the market close Wednesday, and new order trends remained weak for both builders.

I continue to flag Pulte and Ryland as overvalued, and neither company's earnings reports contained enough positive news to change my ratings.

Next Tuesday, the

Federal Reserve

is expected to cut the fed funds rate another 25 basis points. Over the past few months, homebuilder stocks have generally rallied around interest rate cuts.

Some market watchers are now saying this may be the last rate cut, due to rising inflation worries. I suspect the homebuilder stocks might prove weak this time around the Fed cuts, as investors begin to realize that all the band-aids thrown at the housing industry won't stop the massive bleeding anytime soon.

Land Impairment Costs Hit Pulte

Pulte reported a first-quarter loss of $696 million because of land impairment charges that are being driven by falling home prices. The loss amounted to $2.75 per share, worse than the 77-cent-per-share loss analysts expected, according to Thomson Financial data. A year ago, Pulte reported a loss of $86 million, or 34 cents a share.

Revenue fell 22% to $1.4 billion, roughly in line with Wall Street expectations.

On a positive note, Pulte managed to cuts its corporate overhead and sales costs in the quarter, with selling, general and administrative (SG&A) expense representing 14.4% of revenue, vs. 15.4% the prior year.

Orders fell 36% to 5,402 homes. This was better than the 51% decline that analysts at Majestic Research expected.

Cost Structure Weighs at Ryland

Ryland's quarterly loss beat estimates, but revenues fell short.

The builder reported a first-quarter loss of 69 cents a share, better than the 84-cent-per-share loss that analysts expected, according to Thomson Financial, but wider than the year-ago loss of 58 cents a share. Like with Pulte, results were dragged down by hefty land impairment charges.

Revenue plunged 42% to $416 million, missing the consensus estimate of $459 million. Ryland looks to be facing more of a cost structure issue than Pulte. Selling, general and administrative expenses ballooned to 16% of revenue in the quarter, compared with 14% a year earlier. This trend is likely to keep up since Ryland has probably cut its personnel down to the bare minimum -- at a time when revenue is falling.

New orders fell 28% from a year ago, while closings dropped 33%. Both of these metrics were better than the estimates from Majestic Research (which expected orders to fall 43%-48% and closings to fall 37%-43%).

However, orders in Texas -- one of Ryland's larger markets -- were very weak, down 33% in the quarter. Order trends are growing worse in the market. A year ago the decline was 19%.

The Takeaways

Ryland's stock closed at $32.34 Wednesday, which is 1.2 times the latest reported book value of $26 per share in the latest earnings release. Buying homebuilder stocks above book value makes little sense in a market in which companies continue to impair their owned land values because of weakening home prices.

I believe buying Pulte at roughly 0.9 times book value is a trap given the company's propensity to report very large land impairment charges, a trend that may not end anytime soon.

Ryland shares rose 2.5% in recent morning trading Thursday, while Pulte shares inched up 1%.