Downgrades: More Flow As Leighton Warns And Stockland Cuts

Out of the blue, earnings downgrades for the 2011-12 financial year have started appearing, less than a month after the interim reporting season ended.

Yesterday Leighton and Stockland revealed surprise lower earnings outlooks.

On Monday the Bank of Queensland revealed its downgrade in an update for its interim announcement due on April 19.

It revealed an interim loss of $91 million (on underlying earnings of $222 million) after lifting impairment and other charges and revealing a $450 million capital raising.

Last Friday QR National, the Queensland rail group, surprised by revealing that rain and industrial troubles had trimmed its full year guidance.

It said earnings before interest and taxes in the year ending June will be between $540 million and $580 million, down from the $578 million forecast in the prospectus for its November 2010 float and reaffirmed in last month's interim earnings report.

And last week David Jones downgraded its full year profit outlook to a 40% fall, from a 19% drop in interim earnings.

And rival Myer said its full year profit will be off 10%, improving from the 20% fall in half year earnings.

Yesterday Leighton Holdings asked for its shares to be put in a trading halt as it considers potential changes to its financial guidance to the full year.

Leighton said the findings of a current quarterly review of its businesses could prompt a revision of the earnings guidance.

In a statement to the ASX, Leighton mentioned a review of the financial performance of the troubled $4.1 billion Airport Link project in Brisbane.

That project was a key contributor to a significant fall in the company's earnings downgrade in the 2010-11 financial year as a result of write-downs.

Leighton however saw improved operation conditions in the closing months of 2011 and it reported a net profit of $340 million in the six months to December 31.

And it also forecast an underlying profit after tax of between $600 million and $650 million for the year to June 30.

The Brisbane Airport Link has already cost Leighton more than $1 billion. The losses forced the company to cut its 2011 forecast from a $407 million profit to a $430 million loss.

And the value of its stake in the project was cut from $200 million to $63 million.

A further $200 million is to be paid into the project by Leighton when it is finished under an earlier agreement.

The halt on Leighton shares will last until tomorrow morning, unless the company releases a statement about its earnings guidance before then.

The request for a trading halt comes less than a fortnight after Leighton was hit with three penalties totalling $300,000 from the Australian Securities and Investments Commission for contravening continuous disclosure laws in 2011.

Leighton shares had closed at $23.75 on Monday, up 63c on the day.

And property developer and retail mall operator Stockland Holdings has trimmed its full-year earnings outlook because recent floods in NSW and higher bank home loan rates have affected its residential sales.

The news sent Stockland securities lower, falling more than 4% to $3.01 in early trading.

They ended the day at that level.

Stockland said it now sees earnings per security this financial year around 30.5c, 3.5% lower than 2010-11.

The company had been predicting an EPS this year of 31.6c.

Prolonged wet weather, particularly in the Illawarra region of NSW, has resulted in the deferral of a number of settlements into next financial year, the company said in a statement to the ASX yesterday.

It said the recent deterioration in the residential market has also affected sales, as had the banks' recent decision to lift interest rates independently of the Reserve Bank.

''National dwelling approvals are running well below historical trend, and we expect the residential market to find a floor in the next six to 12 months,'' managing director Matthew Quinn said in the statement.

''However, the recovery is likely to be slow unless we see a reduction in bank interest rates to improve affordability and buyer confidence.''

Stockland's distribution to shareholders for the full year will not be affected by the lower earnings, the company said.

Interestingly, three of the four downgrades involve companies with operations in Queensland. It remains a bit of a disaster area.