The Week in Stocks: Beazer Warns Amid Nasty Housing Downturn
Plus, airline outlook falls on crude, Ford nabs a new CEO, and more.
Beazer Homes (BZH) announced that sales decelerated significantly during the first two months of its fiscal fourth quarter. Based upon the extremely weak environment, management reduced its earnings forecast for this year by more than one dollar per share and now estimates that the company will deliver somewhere between 12,000 and 13,500 homes in fiscal 2007. Morningstar analyst Eric Landry was particularly struck by management's comments indicating that a higher percentage of home closings are being postponed or canceled altogether. In Landry's opinion, this means that the backlog that appeared semi-solid earlier this year is evaporating, and houses thought sold two months ago are now back on the market, extending the supply glut. Thus, Landry is reducing his fair value estimate for Beazer to account for a more drastic housing slowdown over the next two years.
Full Analyst Report: Beazer Homes USA
Airline Outlook Falls on Crude
Morningstar analysts Marisa Thompson and Brian Nelson lowered their fair value estimates for several airlines to incorporate our energy team's higher oil price assumptions. Our energy team believes that current stratospheric oil prices are unsustainable, but it has raised its midcycle oil price assumption by about 18%. Though airlines have had some success lately passing along higher fuel costs, Thompson and Nelson think that many customers are price sensitive and would reconsider their travel plans if 5%-10% annual price increases became commonplace. As a result, Thompson and Nelson think that ticket prices will increase at a slower pace going forward, meaning that they'll be insufficient to fully offset the higher crude prices that we expect.
Full Analyst Report: Air Tran
Full Analyst Report: Alaska Air
Full Analyst Report: Gol Intelligent Airlines
Full Analyst Report: JetBlue
Full Analyst Report: LAN Chile
Full Analyst Report: Southwest Airlines
Jeffrey Ptak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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