OK, someone help make sense of these two stories (not the details, just the the general trends).
Headline #1: U.S. Homebuilders Rally After Meritage Sees 'Stabilization'
The Highlight: Meritage Chief Executive Officer Steven Hilton said in a statement yesterday that "we are encouraged by some early signs of stabilization.'' While the Scottsdale, Arizona-based company reported an 81 percent drop in profit in the first quarter amid weak demand, Meritage forecast 2007 profit that exceeded analysts' estimates and said its cancellation rate improved. Full article: http://www.bloomberg.com/apps/news?pid=20601103&sid=a1NLq0kbOAiQ&refer=news
Headline #2: Homebuilders May Break Loan Covenants, Moody's Says
The Highlight: U.S. homebuilders are in jeopardy of violating their lending agreements in coming months because of a drop in sales, according to Moody's Investors Service. More than half, or 11, of the 21 builders that Moody's rates failed to generate more cash than they spent in 2006, analyst Joseph Snider in New York said in a report today. Homebuilders often have to promise banks that they will have twice as much operating revenue as interest expenses over a given time or the bank can demand immediate repayment of a loan, Snider said. Full article: http://www.bloomberg.com/apps/news?pid=20601087&sid=azlbZSOMfYgc&refer=home
Someone tell me why these two articles aren't inconsistent. Or should I stop reading the news? :)
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