Dallas, TX, January 16, 2007--Homebuilder Centex warned Tuesday that it expects to post a loss from continuing operations in its fiscal third quarter as the company grapples with "one of the most challenging housing environments in the past 25 years."
The company said it anticipates reporting a loss from continuing operations of about $2 a share for the quarter ended December 31 on land charges, lower orders and a tax provision adjustment.
In response to a tough housing market, chief executive Tim Eller in a statement said the company is "reducing our land position and inventory, aligning our workforce to the current sales pace, and improving our overall cost structure."
Centex said it closed 8,360 homes during the quarter, a 12% drop from a year earlier. Meanwhile, net sales orders decreased 24% to 6,139 homes.
The company said it expects to take quarterly charges of $150 million related to options on land it's walking away from. It plans to book land-valuation adjustments of about $300 million, with about $100 million coming from joint ventures.
Centex said it has cancelled or intends not to exercise land-option contracts on about 37,000 lots, citing slowing housing activity in many of its markets.
The stock lost 34 cents to $52.82 in early trades Tuesday.
Additionally, Centex said it is increasing its provision for taxes by roughly $60 million in connection with an ongoing tax audit disclosed previously.
Before the adjustments, the company said it expects quarterly earnings to be about 75 cents a share. Analysts surveyed by Thomson First Call had been forecasting, on average, net income of 81 cents a share for the quarter. In October, Centex forecast per-share income from continuing operations of 90 cents for the third quarter.
"We're committed to reducing inventory, generating cash and strengthening our balance sheet," CEO Eller said Tuesday.
The company's preliminary third-quarter results "reflect continuing housing market challenges, belying the notion that the housing market has already turned a corner," wrote Deutsche Bank analyst Nishu Sood in a note Tuesday.
"The company's announcement is a familiar mix of earnings below expectations, orders that continue to fall and ongoing asset impairments," Sood said. Yet the analyst added the 24% quarterly order decline was in line with expectations and better than peers, "due to the company's better relative geographic exposure and some discounting to move inventory."
Centex is scheduled to release full results for the quarter on January 23.
