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TWST: Jack, we are almost through the year. How have building materials
companies done from a business perspective?
Mr. Kasprzak: It has been a roller coaster year. We had about as good a first
quarter this year (the March quarter) as I think you could have. There was great
weather and you still had housing backlogs being worked off, so there was still
some business on the housing side. You also had non-residential and public works
construction starting to pick up, particularly non-residential in the first
quarter. That was about as good a period as you could have. There were several
upside earnings surprises in the group, and that was quickly followed in the
second quarter by a slowdown in business.
The second quarter was more or less when the housing slowdown hit the building
materials sector, and that continued through the third quarter and now into the
fourth. We started to see much of the earnings guidance given by these companies
reflect the impact of a slower housing market. TWST: So is it that results are just falling short of expectations, or are the
companies just getting more cautious, or both?
Mr. Kasprzak: It's both. There have been companies that have been impacted
negatively, and their guidance has been reduced. They have fallen short of
expectations. There are some other companies that are less levered to housing,
but whose stocks were hit pretty hard over the summer that have still done
fairly well and haven't really reduced guidance for the year. Those stocks have
come back and outperformed the group. There has been a differentiation in the
market between companies that are highly levered to housing and companies that
are not.
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