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Wednesday, August 06, 2008
Freddie Mac Posts $821M Second-Quarter Loss
Associated Press
Freddie Mac said Wednesday it swung to a second-quarter loss that was more than three-times larger than Wall Street expected as more homeowners fell behind on their mortgage loans.
Including preferred dividends, the company said it lost $821 million, or $1.63 a share, for the quarter that ended June 30, compared with a profit of $729 million, or 96 cents a share, in the year-ago period.
Otherwise, the quarterly loss for common-stock shareholders was $1.05 billion, down from a $632 million profit last year.
Revenue fell to $1.69 billion from $2.34 billion.
Stock analysts surveyed by Thomson Financial expected a loss of 53 cents a share on $2.18 billion in revenue.
During the quarter, the company set aside $2.5 billion for credit losses as delinquency rate and foreclosures increased -- more than double what it had reserved in the first quarter.
Freddie's (FRE) cash cushion against losses also shrunk, falling to $37.1 billion, or $2.7 billion more than the 20% surplus required by its federal regulator.
To preserve capital, the government-sponsored company said it expects to cut its dividend this quarter to 5 cents or less a from 25 cents a share.
The McLean, Va.-based company also said it would sell at least $5.5 billion in stock.
Freddie and sister company Fannie Mae hold or guarantee nearly half of outstanding mortgage debt in the U.S. The government recently offered a temporary financial lifeline to keep the pair afloat.
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FOX Translator
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Most folks judge the health of a business by the revenue that comes in through sales. But not all revenue is equal. Companies can grow their sales by buying other companies, which means you don't get a clear view of how the real sales trends are moving.
So, many analysts, particularly those who look at retail, try to gauge what¿s known as "organic" growth, by looking at same-store sales. These are sales only at outlets open more than a year, so the metric can exclude any sales jump that comes from opening new locations. Retailers release same-store sales (which are frequently called "comps" since they're a true comparison from the previous period) every month.
Retail, incidentally, isn't the only industry to look at same-store sales. Hospital companies, also use the metric, to gauge how existing hospitals are performing compared to ones they just built or acquired.
