Earnings growth and aggressive stock buy-back schemes enabled some real estate companies to charge forward on Wall Street in October, despite negative news reports about the housing markets.
In a near replay of September, seven of the 10 housing and mortgage-related stocks that make up the hypothetical Inman Index again out-classed the broader market indices. Six of those in October’s plus column — Countrywide, Fannie Mae, Freddie Mac, Realogy, IndyMac and ZipRealty — were repeats from September while IAC/InteractiveCorp jumped onto the list and Washington Mutual fell off it. HouseValues was unchanged, and Move, Inc. posted the Index’s only sequential loss.
Realogy turned in the strongest performance with a 13.5 percent gain. The company responded early to negative media reports and was actively engaged with Wall Street. A tender offer that ended in September resulted in the repurchase of 37 million shares, or nearly 15 percent of the company’s outstanding stock. The shares were bought for $23 each, or $851 million total. Realogy also intends to buy back as many as 11 million more shares on the open market before year-end. The company reaffirmed its August earnings guidance for investors and acquired ONCOR International, a network of 44 independent commercial real estate brokerage companies.
Other strong performers were mortgage companies IndyMac, up more than 10 percent, and Countrywide, up 8.5 percent. A Standard & Poor’s analyst upgraded his recommendation on IndyMac from “hold” to “buy” Oct. 9 with a 12-month target price of $49, according to BusinessWeekOnline. The analyst said a decline in mortgage interest rates would benefit IndyMac as borrowers who had adjustable-rate mortgages would “probably opt to lock in a fixed rate.” IndyMac’s third-quarter results are due out today.
Countrywide announced an increase in third-quarter revenue to $2.8 billion and net income to $648 million, or $1.03 per share, though the company lowered its guidance for 2006 earnings to a range of $4.10 to $4.50 per share. Angelo Mozilo, who founded Countrywide in 1969, will remain chairman and CEO though Dec. 31, 2009, while a workforce reduction will cut another 2,500 jobs at Countrywide nationwide this year, according to news reports.
IAC/Interactive Corp., up more than 7 percent in October, announced its third-quarter financial results at month-end. Revenue amounted to $1.6 billion and net income was $75 million, or $0.24 per share. The company has repurchased 34 million shares this year at an average price of $26.75 and has another 8.8 million shares left in its current stock repurchase authorization. IAC’s board of directors in October authorized an additional repurchase of as many as 60 million more shares, which traded higher Nov. 1.
HouseValues also announced its financial results Oct. 31. The company reported third-quarter revenue of $24 million and a net loss of $1.5 million, or $0.06 per share. Wall Street knocked the company’s shares lower Nov. 1.
Move Inc. said it will announce its third-quarter results today, and ZipRealty has scheduled its announcement for Nov. 8.
An analyst at JMP Securities initiated coverage of Zip with a rating of “market outperform,” according to a news report. Online services such as Zip’s that allow people to comment on and rate for-sale homes generated some press, including a Washington Post story that said such feedback had created an “uproar” in some local realty offices. A ZipRealty executive told the Post that more than 500 comments about for-sale homes were added in one two-week period.
The Inman Index in October gained 5.7 percent, more than enough to best the Dow Jones Industrials, Standard and Poor’s 500 and Nasdaq Composite indices, which gained 3.4 percent, 3.2 percent and 4.9 percent, respectively. The Index is up more than 14 percent so far this year.
Marcie Geffner is a real estate reporter in Los Angeles.
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