DOW JONES NEWSWIRES:Standard & Poor's Ratings Services lowered its outlook on PulteGroup Inc.'s (PHM) junk-level ratings to negative, saying it appears likely the builder will post larger-than-expected losses this year.
The ratings agency said the revision also reflects the heightened potential for a one-notch downgrade if S&P's expectation for a modest recovery in demand for new homes doesn't take hold in 2011. S&P said U.S. new-home sales dropped to a new cyclical low in early 2011, and home prices continue to fall.
S&P currently rates PulteGroup at BB-, which is three notches into junk.
Analyst James Fielding said despite considerable scale and diversity, PulteGroup has been slower to return toprofitability relative to several peers. He said the company's recent losses have contributed to the high leverage and weak earnings before interest, taxes, depreciation and amortization that marks the company's aggressive financial profile.
