(Updates stock information; analyst quotes, including commment that trends in the company's operations seem to be largely in line with those of other builders.)
By Dawn Wotapka
Of DOW JONES NEWSWIRES
Pulte Homes Inc.'s (PHM) third-quarter loss widened, missing analysts' expectations, due to costs related to acquiring builder Centex, while orders jumped 35% from last year amid the deal.
The transaction, which closed in August, created the largest home builder in the U.S., pushing competitor D.R. Horton Inc. (DHI) to second place. Investors and analysts continue to wonder if Pulte timed the bottom to the worst housing downturn in generations or if it jumped too soon, overpaying for land. The results, announced early Wednesday, come as the building sector continues limping toward recovery, with the economy remaining choppy.
The "results reflect a home-building industry that continues its transition toward more stable market conditions as lower prices and historically low mortgage rates are helping to support home buyer demand," Richard J. Dugas, the combined builder's chairman and chief executive, said in the earnings release. "Challenges remain, however, as economic weakness, foreclosures, rising unemployment and recent uncertainty over the expiration of the federal tax credit continue to influence buyer behavior."
Even so, shares of Pulte recently traded up 4.6% to $9.65, compared with a 2.9% gain to 258 points for the Dow Jones U.S. Home Construction Index.
Pulte said it is not in compliance with the tangible net worth covenant under its credit facility. It received a limited waiver from its banks until Dec. 15, permitting it to issue letters of credit. It expects to negotiate a permanent amendment by Dec. 15, but that is not guaranteed.
That raised little concern because the builder ended the quarter with $1.6 billion in cash. "They're going to have enough cash to get through the next year or two assuming that they do not go out and buy large amounts of land," said Joe Snider, vice president and senior credit officer with Moody's Investors Service.
Pulte of Bloomfield Hills, Mich., reported a loss of $361.4 million, or $1.15 a share, compared with a year-earlier loss of $280.4 million, or $1.11 a share. The latest results included $163.8 million in impairment and land-related charges and $86.7 million in Centex-related charges. The prior year - which was not adjusted for the merger - had $266.6 million in write-downs and land charges.
Total revenue dropped 30% to $1.09 billion as closings declined 23% and the average selling price fell 10%.
Analysts polled by Thomson Reuters expected a per-share loss of 69 cents on revenue of $1.23 billion. Half of the latest quarter's results included Centex, making the results more difficult to interpret.
"Since it is hard to separate all the Centex vs. Pulte pieces, it is difficult to draw much of a conclusion about the trends in operations other than to say that they seemed largely in line with" other builders, Rob Stevenson, an analyst with Fox-Pitt Kelton said in an analyst note.
-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com
(Kevin Kingsbury contributed to this article.)