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alstry (35.41)

OUCH!!!!! S&P Blows smoke up investors' *** and RYL padding earnings????

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14

April 23, 2008 – Comments (3)

Less than a week ago, S&P estimates RYL's revenues at $665 million.  We all know what I thought about that estimate......without RYL dumping a bunch of land, with 40% lower backlog and 50% fewer specs, it was impossible for RYL to generate anything close to S&P's 6% revenue decrease estimate.

The numbers are in, no big land sale, and revenues came in at a negative 41.5%...consistent with beginning backlog and a lower spec count.

Not only that, S&P earnings estimate was off by about 40%, but that is not as big a deal because the number could have come in anywhere plus or minus a few dollars whether RYL executives want to be honest with shareholders about fair value of the assets.

IS RYL PADDING EARNINGS????

From the report:

Homebuilding revenues for the first quarter of 2008 included $2.8 million from land sales, compared to $4.0 million from land sales for the first quarter of 2007, which contributed net gains of $998,000 and $500,000 to pretax earnings in 2008 and 2007, respectively.

DOES THE SHARE SELLING CEO REALLY EXPECT US TO BELIEVE THAT SELLING JUST $2.8 MILLION DOLLARS OF LAND GENERATED ABOUT $1 MILLION IN PROFIT THIS YEAR WHEN SELLING $4 MILLION DOLLARS LAST YEAR GENERATED ONLY $500k LAST YEAR!!!!!!

C'mon Chadepoo, land has crashed in value from last year to this year.....is it possible that the land was impaired to almost zero last quarter to pad earnings by $3 or $4 or more million this quarter from actual cost to actual sale?  We could be looking at over $0.10 cents per share.

Now here is the meaty part.  If you look at the value of RYL "homes under construction" on the balance sheet, it is down over $10 million from last quarter but backlog is UP over 20% from last quarter.  That means RYL will need lots of cash to build out those backlog homes to deliver to customers.  Cash that RYL likely does not have right now as cash decreased by about $30 million from last quarter to this quarter.

Less cash, bigger backlog, RYL will likely need to raise capital in order to fulfill its backlog requirements.  It can either do it by announcing a public offering or drawing down on its revolver.  With banks becoming more savvy about the current environment, not to mention regulators clamping down, it will probably be more palatable to go to the public to raise cash.

The question now will whether the public will be receptive to such an offering? 

This is just a quick analysis a few minutes after the release....if I can find more time, I will provide further detail.

Pretty amazing though, just last Friday, S&P goes out of its way to guide revenues at $665 million, silly me thinks S&P has some inside information, only to find out that it was another S&P donkeydoodoo pump.

Does RYL pay S&P for its reports?  Can't wait for FBs excellent report.  Let's see if any "analyst" tomorrow calls the company on the land sale "profits" or the need to raise cash.....

It getting crazy my friends, when S&P already in hot water for its mortgage ratings, has the jewels to make an unsupportable pump just a week before earnings.

3 Comments – Post Your Own

#1) On April 23, 2008 at 6:11 PM, alstry (35.41) wrote:

RYL's BIG, no HUGE issue right now is cashflow...or should we say need for cash.

It ended the quarter with only $213 million in cash but had OVER $450 million of payables and accrued liabilities.  Not only tht it took in some order which it is going to have to spend hundreds of millions to build out BEFORE delivering.

The make the problem even more accute, RYL did an excellent job of liquidating its cashflow rich specs this quarter which inhibits its future ability to raise cash by selling already built and paid for specs.

If you do the math, RYL needs to raise a few hundred and maybe more million, not the comical less than $100 million MTH offering that we have yet to determine whether it even got funded. 

Some real cash is needed here.......and that is assuming a lot of buyers don't cancel leaving RYL holding the bag...or should we say unsold home that RYL had to pay to construct.  If cancellation rates are high, than even more cash will be needed.

Folks, here is the problem, if everything is going well at RYL, then tell us and that is wonderful.  If there are issues, tell shareholders with a fair presentation of the facts and reasonable perspective of the outlook.  But don't tell shareholders everything is great while the CEO is dumping shares and the company needs to raise hundreds of millions of dollars to keep the operation going.

It is simply about keeping the playing field fair between Wall Street, company executives, and investors.

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#2) On April 23, 2008 at 8:48 PM, mandrake66 (94.27) wrote:

Bottom is in. Stock is oversold. Huge upside from here.

Sorry, I just love saying that. 

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#3) On April 23, 2008 at 9:13 PM, alstry (35.41) wrote:

"On average, analysts had forecast a loss of 77 cents per share, according to Thomson Financial. Analysts typically disregard nonrecurring costs when issuing their forecasts."

http://biz.yahoo.com/ap/080423/earns_pulte.html

Has anyone noticed that the analysts don't mind adding those fictional profits back into future quarters earnings as a direct result of those past quarters writedowns that they disregard?

So analysts disregard writedowns if it contributes to losses but add them back in as far as profits goes.

Does that sound like heads I win and tails you lose?  No wonder Buffett lives in Omaha and not New York.

 

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