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Building and Product Manufacturers’ Indices End in Positive Terrain

Despite weak manufacturing data at the close of our session ended May 31, 2005, Wall Street focused on strong consumer confidence. The Conference Board’s confidence index climbed to 102.2 and was substantially higher than the 96 that analysts were anticipating, largely on falling oil prices. In contrast, the widely followed Purchasing Management Association of Chicago’s index of business activity in the Midwest slowed to 54.1 in May, down from 65.6 in April. A number below 50 signals contraction, above 50 indicates expansion. “Typically at this point in the cycle investors seek clarity on inflation and economic growth,” said Scott Wren, senior equity strategist at A.G. Edwards in St. Louis. “As you transition from higher growth and low inflation to slower growth and higher inflation, typically the indicators remain mixed, which is what we’re seeing.”

Both the Builders’ Index and the Building Product Manufacturers’ Index ended in the black, with the Builders’ Index ahead a robust 103.98 points, or 9.09 percent, to close at 1243.88. Advancing issues surged past declining issues by an 8-to-1 margin. The Product Manufacturers’ Index edged forward 8.15 points, or 0.81 percent to end the month at 1012.80. Advancing issues outmaneuvered declining issues by a 10-to-4 count.

Shares of Orleans Homebuilders rose 5.08 points, or 29.18 percent to end as our top percentage gainer on the Builders’ end this session. Orleans third quarter net income was $10.6 million, or $0.56 per share, compared to net income of $7.8 million, or $0.45 per share earned in the same quarter last year. Orleans said the results included the acquisition of assets of Realen Homes and Peachtree Residential Properties. Orleans ended the month at 22.40.

Toll Brothers jumped 16.79 points, or 22.15 percent in May after the company blew past analysts’ expectations for the quarter and the company upped its growth predictions for 2005. Toll Brothers reported second quarter net income of $170.1 million, or $2.01 per share, versus net income of $72.4 million, or $0.89 per share earned in the year-ago quarter. Analysts surveyed by Thomson Financial were expecting $1.79 per share. The company now says it anticipates 70 percent growth for fiscal 2005, instead of a previous forecast of 60 percent growth for the year. Toll Brothers closed at 92.59.

On the Product Manufacturer’s side, Weyerhaeuser stumbled after the 9 th U.S. Circuit Court of Appeals upheld a $78.7 million judgment against the company. The lawsuit said that Weyerhaeuser used predatory overbidding and overbuying, among other practices, to hinder rivals’ competition. “Substantial evidence supports the jury’s finding that Weyerhaeuser was liable for attempted monopolization,” Thomas Nelson wrote for the three-judge panel. “Therefore, we affirm the court’s denial of Weyerhaeuser’s motion for judgment as a matter of law or for a new trial.” Weyerhaeuser lost 4.66 points, or 6.77 percent, and closed at 64.15. Weyerhaeuser was our top dollar loser.

Whirlpool stormed ahead by 6.74 points, or 10.84 percent, after Chairman and CEO Jeff Fettig reiterated the company’s guidance for fiscal 2005. Whirlpool expects earnings of $5.90 to $6.10 for the year. The consensus average from analysts polled by Reuters Estimates is $5.92. Whirlpool ended at 68.80 and was our top dollar gainer this session. Maytag also enjoyed a healthy boost after announcing that Ripplewood Holdings would take the company private, offering $1.13 billion, or $14 per share. Maytag jumped 4.90 points, or 50.57 percent, and was the top percentage gainer this month. Maytag closed at 14.59.

American Standard slid 1.91 points, or 4.27 percent to end at 42.80. The company announced that it will pay a quarterly dividend of $0.15 per share on June 30, 2005 to shareholders of record as of June 1. 2005. American Standard was our top dollar and percentage loser in the Product Manufacturer’s Index this session.