If you believe management at USG (USG), the worst for housing looks to be over.
CEO William Foote recently said “The commercial market, which had remained relatively stable during the collapse of the housing market may have reached its peak. So our major market segments are weak, but any further declines are likely to be less severe than that which we’ve already experienced.
Said another way, we believe the drama is over and it’s now about working through the bottom and getting back to a more growing environment. Indeed not all the news, though, I have to share is bad. There are some encouraging signs in the market…”
Also noted:
* The price decline in wall board prices has stopped and the Q1 increase they saw was the first in “more than 15 months”.
* The first price increase was February 15th and that was announced at 10% increase and then followed up with an April 7th increase of 10%.
* Wallboard production volume in Q1 was up slightly from the fourth quarter of 2007.
Foot also said:
“Yes, the fundamentals of new housing [inaudible] and its a pretty, our sense is refining a bottom we haven’t called it yet, I mean it’s sort of function of what the broader real economy and the capital markets do. But it’s feeling like that or you saw them all starts number and it was a little bit below expectation. And so, we were just long the bottom here. But I don’t think, we haven’t changed our view of the aggregate market opportunity this year and although let’s say, it seems to be sort of as I said in my opening comments, we think the drama is over and just sort of pumping along here and importantly [ph] in the next year. Because we have worked to this inventory and so homes but the worst news is behind us just the matter of… with this bottom.”
If you are asking about housing, ignore the builders. Their individual results are irrelevant as the multitude of factors going into them distort their actual meaning. USG is a far better gauge. No matter what is being built by whom, they need USG products.
Foote and Co. have a far better take on the situation as a whole than a DR Horton (DHI) or Centex (CTX) do individually. Based on what they are saying, there is light at the end of this tunnel. It may be a way off, but there is light.
Disclosure (“none” means no position):None
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