WCI Warns On 3rd Quarter Profits
I’ve been buying long-term puts on a Florida condo & home builder called WCI and ever since then the stock has been up 20%. Finally after about 3 weeks they’ve warned the 3rd Quarter profits will not meet expectations. Hopefully the stock won’t bounce on this news!!!
the homebuilder was hit by a larger-than-expected spate of defaults. About 80 homes valued at $48 million failed to close during the quarter.WCI also raised its tower default rate to 4%, about double its usual average, after experiencing higher-than-normal defaults at one of its towers in northwest Florida.
New orders for homes and condos are projected to plummet 80% below the total reported in the same quarter a year ago. The 60%-to-65% drop “in the value and number of traditional home new orders” reflects the summer sales slump compared to the 40.5% to 43.5% year-over-year new order shortfall from the second quarter of this year.
Despite this poor performance and probable industry-wide decline the CEO sounded very optimistic.
“With the current slowdown in demand, we believe we own sufficient land to support our operations through the foreseeable future. We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily towards debt reduction and stock repurchases,” Starkey added.
You’re bleeding cash, suffering losses and you “claim” you’re going to buy back stock. Yeah right, I’ll believe it when I see it! Especially since insiders have been selling millions of dollars worth of stock in the past 12 months.
And their SEC fillings show that their stock repurchase program is more of an option speculation.
In connection with its previously announced common stock repurchase program, WCI Communities, Inc. (the “Company”) entered into an agreement with Citibank, N.A. on September 15, 2006 pursuant to which the Company may enter into a series of capped one-year call option transactions with Citibank, N.A. (”Citibank”) with respect to up to 5,000,000 shares of its common stock. The Company has agreed to pay Citibank. approximately $25 million if the capped call option contracts are established for the entire 5,000,000 shares. Any option payment will be accounted for as a reduction to shareholders’ equity.
Sounds like one bad move after another.
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October 4th, 2006 at 5:53 am
Thanks for the info, I read your post this morning before market open and pulled 50 cents out of the down move right off the open!
October 4th, 2006 at 9:46 am
I dont know to much about the stock but I live in tampa,florida. They build some nice communities.. They got a community called sun city center and it is a community centered around retirement. People drive around in golf karts. It is pretty cool..
I would go long term with that stock IMO
October 4th, 2006 at 12:30 pm
I’m glad someone’s making money on this piece of crap!
Pyro, why would you buy stock in a company which is losing money, who’s entire industry is heading for a slump that may last several years, who’s management is dumping the shares and announcing bogus share buy backs?
if you like their product, wait a few years and buy a house.
but forget the stock, there are better places to invest.