Zacks Analyst Blog Highlights: D.R. Horton, Leap Wireless, MetroPCS, Verizon and AT&T - Press Releases
For Immediate Release
Chicago, IL – February 3, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: D.R. Horton (DHI), Leap Wireless (LEAP), MetroPCS (PCS), Verizon (VZ) and AT&T (T).
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Here are highlights from Tuesday’s Analyst Blog:
D.R. Horton Returns to Profitability
D.R. Horton (DHI) reported net income of $192.0 million or 56 cents per share for the first quarter of its fiscal 2010, compared to a net loss of $62.6 million or 20 cents per share in the first quarter of fiscal 2009.
The current year quarter includes a tax benefit of $149.2 million. Excluding this, fiscal 2010 first quarter earnings are $42.8 million or approximately 12 cents per share. The Zacks Consensus Estimate was a net loss of 16 cents per share.
D.R. Horton reported first quarter home sales revenue of approximately $1.1 billion on 5,529 homes closed, compared to $900.3 million on 4,068 homes closed in the same quarter of fiscal 2009.
First quarter net sales orders (which reflect homes to be closed in the future) were 4,037 homes ($850.1 million), an improvement from 2,777 homes ($567.5 million) in the prior-year period. The company attributed this improvement to its focus on providing affordable homes. It took advantage of the demand created by the federal tax credit for first-time homebuyers.
The cancellation rate declined to 26% in the first quarter of fiscal 2010 from 38% last year. The company reported first quarter sales backlog was 4,136 homes ($884.0 million), compared to 4,006 homes (approximately $889.1 billion).
The home sales gross margin (before inventory improvements and land option write-offs) improved 160 basis points to 17.1%, primarily as a result of average cost of homes declining by more than the average selling prices. D.R. Horton enjoys economies of scale, whereby it can pressure suppliers and subcontractors for lower prices so that selling prices can be reduced without sacrificing margins.
Leap Wireless Mulls Sale/Merger
Unlimited prepaid wireless carrier Leap Wireless (LEAP) is reportedly exploring opportunities for a potential sale or merger with a rival operator. The company has hired Goldman Sachs (GS) and Morgan Stanley (MS) as advisors and formed a three-member special committee to evaluate strategic options and find a potential suitor for Leap.
While the most likely partner for Leap is its archrival MetroPCS (PCS), other potential candidates are Tier-1 US carriers such as Verizon (VZ) and AT&T (T). MetroPCS, which targets similar consumer demographics as Leap, had made a $5.5 billion all-stock acquisition bid in 2007, which was rebuffed by Leap as too low.
A potential deal with MetroPCS makes sense as both operators have similar business model, which are exposed to aggressive price competition. However, the companies share a history of bitter negotiations when it comes to merger talks.
Leap has reportedly approached Verizon and AT&T, however, no deal has been reached yet. Top-tier carriers may face tough regulatory hurdles to secure an approval to buy Leap. Verizon and AT&T collectively having more than 60% command over the US wireless market, may have to divest a significant portion of assets in Leap’s markets to secure regulatory approval for the acquisition.
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