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alstry (< 20)

S&P vs. Alstry on RYL



April 19, 2008 – Comments (4)


4/18/2008 S&P MarketScope, Stocks In News


RYLAND GROUP SHARES (RYL 33.68***): Ahead of April 24 release of Q1 results, we estimate revenue of $665M, down just 6% from a year ago as quarterly comparisons appear to be getting easier for RYL and other builders. We look for a $0.50 loss compared to Street's mean estimate of an $0.88 loss. We see RYL as one of the better-managed builders, with below-average asset impairments compared to peers, at $673M since the beginning of '06. RYL was not aggressive, inour view, in buying land inventory at the peak of the housing market in '05. We see strength in its balance sheet, with most debt maturing in 2011 or later. /K. Leon-CPA



Last year RYL ended Q4 with about $1.3 Billion in backlog and twice as many specs as this year. In a better selling environment and twice as many specs, RYL generated about $700 million in revenues or converting something better than 55% of backlog.

This year, RYL ended the quarter with about $786 million of backlog and half the specs of last year in a much more difficult selling environment. With half the specs, if RYL were to convert a similar backlog percnetage, they would be lucky to generate $400 million in revenues.

Factoring the lower spec count and more difficult selling environment, it is more likely RYL will only be able to generate about $325 million in revenues at much lower margins(save material land sales).

Currently, consensus analyst estimate is about $458 million, or higher than last years conversion rate when the company had twice as many specs and a better selling environment?

S&P is estimating revenue of $665 million, or over $200 million higher than current analyst consensus estimates(approximately 40% more).  If RYL did generate $665 million, that would be an 85% backlog conversion.  Very impressive in the current distressed environment absent a major land sale.  Further it would eclipse last years conversion percentage when RYL had twice as many specs.

With only $786 million of ending backlog last quarter, it seem highly unlikely that RYL will generate anything close to $665 million unless of course RYL sells a bunch of land.  If RYL does in fact sell land, we know that current prices are very depressed. So depressed that it would seem impossible that RYL would only lose $0.50 cents.  S&P says RYL will accomplish both?  Much higher sales and much lower losses than consensus....we will see.

My estimatge is for RYL to generate $300 to $400 million in sales from houses and lose about $1.50-$2.00 per share.....but if in fact RYL does sell a lot of land to raise cash, than losses may likely exceed $3.50 per share(7X S&P's estimate).

It looks like we see things pretty much eye to eye.

4 Comments – Post Your Own

#1) On April 19, 2008 at 5:15 PM, alstry (< 20) wrote:


From last Q's S&P report:

1/24/2008 S&P MarketScope, Stocks In News


RYL posts Q4 loss of $4.80 vs. loss of $2.05, after $242M in asset impairment charges for land inventory and land options, wider than our $0.17 loss estimate.

Last quarter, RYL lost about 30X more than  S&P's estimate.  But even though S&P missed by so much and downgraded the stock, it maintained a $31 price target by expanding its price to book value.  Go Figure.  Now you know why I place almost no creditbility in S&P anymore and actually believe that since RYL pays them to rate them, there is a conflict of interest and the reports are clearly biased  and  misleading.

What might be possible is that RYL knew is was dumping a bunch of land this quarter and pre impaired land to mangage this quarter's earnings.  From this perspective, there is little chance that RYL generated anything close to S&P's revenue guidance based on selling houses.

RYL took a $242 million dollar asset impairment last quarter.  IF that asset impairment was taken on land it is actually sold this quarter, than RYL's earnings could look better than actual results would indicate.

Just guessing, but it looks like RYL will be selling a bunch of land this quarter to raise some desperately needed  cash. 

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#2) On April 19, 2008 at 5:43 PM, alstry (< 20) wrote:

Looks like my instinct may be right.  From last quarters RYL report:

"Homebuilding revenues for the fourth quarter of 2007 included $5.9 million from land sales,"

RYL took over $200 million dollars in impairments for just $5.9 million in land sales.  Yeah Right!!!!!

It is now very likely that much of RYL's revenues this quarter is going to come from dumping land and not selling houses.  If it does happen, management concealed it from shareholders as RYL didn't file an 8K for a material disposition of assets.  A potential violation of SarOx?  We will see in this weeks report.

Further, even if RYL sells hundreds of millions of cash flowing land, don't expect them to have too much cash on the balance sheet because they ended last quarter with a bunch of payables that current quarter's house sales couldn't likely cover.


Ahead of April 24 release of Q1 results, we estimate revenue of $665M, down just 6% from a year ago as quarterly comparisons appear to be getting easier for RYL and other builders.

"Quarterly comparisons appear to be getting easier?" 

Bulldonkey.  Quarterly comparison's are getting harder because selling houses is getting harder.  Liquidating land for pennies on the dollar is still around, but the house selling business is getting more and more difficult by the day.  Once you liquidate all your land, there ain't much left if selling houses is not working.

After this quarter ends, RYL will likely desperately need cash for upcoming quarters if it wants to stay in business.  Without much more land to sell, get ready for an attempt at a public offering that will likely dilute shareholders wonder the CEO has been selling shares.



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#3) On April 19, 2008 at 9:49 PM, floridabuilder2 (98.66) wrote:

you may win our bet based on chatter i am hearing

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#4) On April 23, 2008 at 12:08 AM, thisthatother47 (64.56) wrote:

Any further insight on what you are hearing FB??

 Chalk another one up for the things I've learned from you two - I was the only one in the bar this weekend to know the name of a certain famous Italian shoe designer....

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