Newport Home Builder’s Earnings Dive

NEWPORT BEACH —  Home builder J.M. Peters Co. Inc. reported sharply lower earnings Friday for its third quarter as the market for new homes in Southern California slowed down.

Meanwhile, a local stock analyst said a sale of the Newport Beach company could come as soon as the end of the year.

Peters said earnings dropped to $5.7 million for the quarter ending Nov. 30, compared to $8.5 million last year.

That has probably lowered the price of the company, which, according to Mark Matheson of the Newport Beach investment banker Cruttenden & Co., is being courted by at least five possible buyers since being put up for sale with an investment banker in August.

Matheson said the troubled Texas savings and loan association that owns most of the stock in the home-building company must raise cash to meet tougher new federal requirements on the thrift industry.

That thrift, San Jacinto Savings Assn., is itself a subsidiary of Dallas’ Southmark Corp., which is in bankruptcy proceedings.

Matheson said Peters is said to be pursued by three or four East Coast builders or developers seeking a foothold in the California market and one foreign bidder, possibly Japanese.

Matheson was also strongly critical of what he said was the company’s failure to inform shareholders on the progress of the sale.

Here’s why: The 13% of Peters stock that is owned by the public has been falling since San Jacinto hired Shearson Lehman Hutton Inc. in August to sell Peters.

The stock sold for nearly $14 then. Friday it traded at $8.50, down 25 cents for the day, and an impressive 67,000 shares changed hands after Peters announced its disappointing earnings. Investors are sour on the home-building industry, fearing a big downturn could flatten sales.

Yet Peters may still fetch as much as $12 to $13 a share from a buyer who takes a longer view of the market and wants entree to California, Matheson said.

“I think they do a disservice to shareholders who may not be aware the company could sell for that much,” Matheson said.

At $13 a share the company would cost about $180 million.

A Peters spokesman said Friday that he can’t comment on the identity of the bidders because San Jacinto and Shearson Lehman haven’t told Peters anything. For the same reason, the home builder can’t be blamed for not keeping shareholders informed, Peters said.

“San Jacinto is the owner and they’re the ones doing the marketing,” said a Peters spokesman. “We’re totally out of the loop.”

Meanwhile, the market is soft for the large, expensive homes that Peters builds.

The type of people who can afford these houses--usually people who already own a home and who use the equity from a sale to “trade up” to a Peters house--aren’t selling their houses as often this year. Hence, fewer customers for Peters’ luxury homes.

Peters said its revenues fell from $88.5 million in third-quarter 1988 to $70.4 million this quarter. Buyers contracted for 84 new homes compared to 103 last year.

For the first nine months of Peters’ fiscal year, earnings dropped to $14.2 million compared to $23 million last year.

Revenues fell to $188.2 million compared to $269.4 million last year.