Wednesday, April 20, 2005

Ryland: The Top Is In

The home builder Ryland Group confirmed the peak is in with revenue and net income guidance for 2005 that is below consensus. "Ryland is saying it anticipates per-share earnings will exceed $7.50. The company had previously expected earnings of more than $7.25 a share."

The consensus number was $7.65 and the market was quick to sell off. It is the first time in many months that a large homebuilder has not out-performed.


At 4:11 PM, Anonymous Anonymous said...

Am I missing something? All I can see is Ryland beat estimates and increased guidance. Only "bad" news is the last sentence where the stock is down, which means that the market doesn't believe the rosy picture Ryland is painting.

At 4:16 PM, Blogger Ben Jones said...

The stock is down because the future guidance was lower that previous company and industry estimates.

At 4:38 PM, Blogger Ben Jones said...

"The company said it repurchased about 485,000 shares of its common stock during the quarter, and the board of directors has authorized the purchase of roughly 2.5 million additional shares."

Also a sign the company doesn't see growth or else they would invest it in land, etc.

At 4:53 PM, Anonymous Anonymous said...

Here is what buybacks are "really" for. Now that there is increased SEC vigilance, employees and insiders cannot trade stock except for perhaps a one week window shortly after quarterly earnings are released. When your stock is at or near a multi year high like the homebuilders, it means insiders have unrealized gains and employees have in-the-money stock options that they want to cash out in order to "diversify." All of this insider selling during the same week can create downward pressure on the stock especially if it is a low volume stock. The specialist or market makers know this and they have access to the buyback to absorb some of the selling pressure. I know this because I worked for such a company.

At 5:08 PM, Anonymous Anonymous said...

Additionally, share buybacks are an effective way of increasing you EPS.

At 5:09 PM, Anonymous Anonymous said...

Also note that there are two estimates - the "offical" estimate and the (usually higher) "whisper" estimate held by Wall Street insiders. A company can beat its official estimate and still tank if it misses its whisper estimate.

Of course, somehow one never hears about this in the financial media, just as one never hears about options expiration pinning, tax selling (which we had last week), tape-painting to pad mutual fund quarterly results numbers, or Federal Reserve and treasury liquidity injections.

There are at least two sites that claim to sell whisper numbers, but I don't know how legit they are.


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