Lennar - Bob (fast)
>> wall street not done yet. stocks sink after ben bernanke puts out his first statement as chairman of the federal reserve, indicating more rate firming ahead, also signaling inflation concerns. let’s look at the settling numbers. it’s pretty clear what time that decision came out, 2:15 eastern standard time and the dramatic selloff that ensued. lennar’s stock was higher today. the homebuilder’s first-quarter earnings and revenue exceeded analysts’ estimates. bloomberg’s bob bowden joins me now with more on lennar and the homebuilding group as a whole.
>> thank you, lori. the fiscal first quarter typically the slowest for lennar’s earnings as it contains the december holidays and coldest months of january and february. the most recent first quarter was the best in lennar’s history. operating earnings were $1.58 a share or three cents a share above the analysts’ estimates and 35% higher than that $1.17 of a year ago. the $1.17 of a year ago was 39% higher than 84 cents from two years ago. that’s progress on earnings. look at the revenue progress, $3.2 billion last quarter, up 35% from $2.4 a year ago and almost double two years ago. so the $3.2 looks good by that standard. but c.e.o. stuart miller had a cautionary remark in the press release today, saying, “while there has been a slower sales pace in certain markets in which we operate and price appreciation in these markets has moderated relative to the appreciation experienced in the past few years, we were still able to achieve a 4% increase in new orders during the first quarter.” now, that’s less than half the 9% order growth they reported a year ago. much of the cause for concern can be seen in two charts. first, the median price for new homes. the right side of the chart, a one-year chart, showing four down months in a row. last time we saw four down months in a row of the median price in new homes was 1995. the perspective going from $244,000 on average to $230,000. mortgage rates over the last three years, the average rate on the 30-year fixed mortgage hasn’t been over 6.4% since way back here, that was 2003. by the way, it was just over 6.4% for one month back then. if you look now at where we were on friday, 6.32%, within striking distance of a new 3 ½ year high on mortgage rates. paul pruyear follows homebuilding stocks for raymond james and points to another concerning metric in the group, inventories.
>> we’re still very concerned about inventory levels in the u.s. and those inventory levels i’m speaking of are the inventories of rental housing, vacant rental housing, condos, unsold homes. we’re looking at all that information and inventories are up pretty substantially versus where they’ve been based on historical trends.
>> taking a look at today, lennar, the company with those earnings, was up 1.2% to $61.03. looking at other homebuilder stocks, many were down. they were mixed on the day but pulte homes down 3%. standard pacific down 1.7. lori, over to you.
>> many u.s. lawmakers and u.s. manufacturers believe the yuan is undervalued by as much as 50%, giving the chinese companies an unfair advantage over u.s. companies. lindsey arent joins us from washington with a report on what lawmakers are doing about the issue.
>> lawmakers point to china’s undervalued currency as a pretty big reason for the record $202 billion u.s. trade deficit with china last year. today, they tackled the issue but the problem is, congress is still divided. for years, lawmakers have complained that china purposely undervalues its currency to give its exports an improper trade advantage.
>> what’s unfair is for the government to take the value of the money and change it based on whims.
>> today, lawmakers on capitol hill grappled with the issue and found themselves divided over solutions.
>> our goal is to get the chinese to let their currency float.
>> fresh from a recent trip to china where they lauded signs of currency reform, senators chuck schumer and lindsey graham said they would delay a vote on a bill that would levy 27.5% tariffs on chinese imports.
>> now that we’re on the path to progress, we don’t have to fire this so-called nuclear weapon.
>> but just two hours earlier, top lawmakers on the senate finance committee announced a tough measure that would impose new penalties on china and other nations that have a currency imbalance with the u.s.
>> if another country plays currency games, we’re going to have a strong talk with them. if they won’t shape up, they’ll feel consequences such as when they try to get international loans or when they try to influence global economic policy.
>> china’s let its currency rise only 1.1% since last july. with recent pressure from congress and the white house, former treasury secretary paul o’neill predicts future compliance from china.
>> i think the chinese are very smart. when i was there as secretary of the treasury, the alan greenspan of china said to me they knew they had to float and they would do it in their own time and in their own way. and the last year, they finally moved a very small amount.
>> all this comes as washington prepares for a visit from chinese president hu jintao on april 20. experts say there’s probably going to be significant announcements then with regard to floating the chinese currency. lori?
>> lindsey, thank you. adobe shareholders getting the scoop on the company today at its annual stockholder meeting. pacific crest analyst steve lidberg joins us next to break it all down. stay with us.
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Listen Interview: Analyst with Pacific Crest Securities
>> welcome back. the world’s largest maker of graphic design software is holding its annual meeting for stockholders today. joining us now to discuss. adobe’s business and outlook is steve lidberg, analyst with pacific crest securities, joining us from portland, oregon. welcome. , as i’m sure you’re well aware, adobe’s earnings call last week very disappogating. disappointing. first-quarter profit fell 31% on costs related to the purchase of macromedia and adobe said current-quarter sales may miss estimates. did you hear anything encouraging today?
>> as you look at the stock, the performance coming out of the quarter was actually a little bit better than what we anticipated, especially as they were driving some improved leverage to the bottom line. i think that the outlook concerned people going forward a little bit. people hoped for a little bit better. the reality is, comparisons are difficult given the health of the market in place over the last three years and these guys have really benefited. i think, looking forward, what we have to be paying attention to is some of the new product upgrades they’ll be introducing at the end of this year and spring of next.
>> is that creative suite, acrobat, the latest versions? do you have an idea of how on schedule those are?
>> at the end of this year we should be seeing the latest introduction of the acrobat product line and then spring of 2007 will be the introduction of the creative suite and at this point everything looks to be on schedule. the big one will be the introduction of the creative suite early next year as you hopefully will see the first integrated product that includes both the adobe as well as the macromedia product suites.
>> that is a little way away so is it a fair assumption do say that we might have a few more lackluster quarters until those products are on line?
>> may will be a solid quarter for adobe and then you tend to enter the seasonally soft august quarter before things start to heat up again as you look into the november quarter, correct.
>> the other story with adobe was the purchase of macromedia, a considerable purchase. how has that worked out for them? how would you rate the integration?
>> so far, the integration’s gone very well. we haven’t seen any missteps out of the company and i think as you look at the customers, the customers on both sides of macromedia and adobe are receiving the acquisition―or the merger very well. and i think from a product standpoint, we’ll see how that goes in 2007. really from adobe’s perspective, macromedia opens up some new growth opportunities, the opportunity to move beyond just the desktop, move to handsets where mobile flash is going and the strong adoption we’ve seen there by many of the handset vendors as well as more into the video space where you’ve seen a lot of success with flash video on the p.c. and the internet environment.
>> are you saying that adobe has yet to benefit from the macromedia purchase?
>> we saw some of the benefits last quarter, i think, in terms of the benefits of the customers will see. a lot more to come and as you look at the new markets , those are just starting to ramp up so those have yet to put in place their impact on adobe’s model. >> you mentioned the challenge in comps for adobe. i know you have a sector-perform rating on the stock. sounds like you’re comfortable with the current valuations?
>> yeah, the current valuation is fair on the company. i think as you look at it, what we’re looking for is the catalyst and see how these new product introductions late this year, early next year set the company up.
>> adobe also facing a management shakeup with the pending resignation of their chief financial officer. how significant is this to you as an analyst in judging the performance of the company?
>> murray’s been great. obviously, change at the management level introduces a new person in the mix and we watch that closely. the good thing is, adobe has a lot of talent across the business, especially with bringing in some additional talent from macromedia so i think all things look good and we’ll see who they bring in to replace murray hopefully the end of this quarter.
>> summing everything up, what did you get from the stockholders’ meeting today or what did you hear as the most important thing to take away?
>> the franchise from adobe’s perspective is still in place. they’re continuing to look at expanding their market opportunity both with their existing product lines as you look at the creative suite as well as opening up new opportunities for growth with the macromedia acquisition.
>> we actually do have extra time. let me ask you about microsoft, competition gearing upto release their own graphic design program. will this be a significant threat to adobe?
>> we take microsoft, obviously, very seriously. i think one of the advantages that adobe and macromedia have always had in the marketplace are really twofold. one, they own the mine share of the creative professional. this is an adjacent opportunity for microsoft as they look at providing capabilities in this market and the other thing from the adobe and macromedia perspective is they really look to be multiplatform so regardless of the infrastructure you’re working on to work with this rich media capability, mac or windows or what have you, they’re looking to be there to help you out. from a microsoft perspective, obviously, they’re primarily almost exclusively focused on the windows opportunity.
>> really appreciate your insight, steve, thanks, again.
>> thank you.
>> this is steve lidberg, analyst with pacific crest securities. ben bernanke’s first fed meeting ended with another rate hike but the chairman has suggested core inflation remains near a comfort zone. what’s that all about? we’ll ask bloomberg news editor-at-large.
