Zacks Analyst Interview Highlights: D.R. Horton and Ryland Homes

Business Wire, June 4, 2008

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Mario Ricchio, who discusses D.R. Horton (NYSE: DHI) and Ryland Homes (NYSE: RYL).

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Are there deals for bargain-hunting investors in housing right now, or is there a ways downward to go yet, do you think?

We suggest investors avoid bottom-fishing or trying to catch the proverbial "falling knife." Based on current book values, investors may be tempted to buy up homebuilding shares. However, the builders, such as a D.R. Horton (NYSE: DHI) or a Ryland Homes (NYSE: RYL) may have to take an additional write-down on land assets and write-offs to reduce land option positions. This means book values have further to fall before they adequately reflect the current condition of the housing market.

How would you advise investors play the housing market going forward? What should we be looking for?

We continue to recommend underweighting housing and housing-related stocks. The builders have another six to eight quarters of poor earnings ahead of them. Given the prospect of a further decline in housing starts, lower median home prices, and aggressive incentive use, industry profit margins are likely to remain under pressure. We do not see an earnings recovery until fiscal 2010. Investors should seek growth elsewhere.

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