Dallas, TX, November 16, 2005--Homebuilder Centex Corp. said it sees the housing market heading to a more "normalized" growth pace after several years of outsized home price increases, yet still issued a profit forecast for 2007 that was above the consensus analyst estimate.
During its annual investor conference, chief executive Tim Eller said although the company sees prices flattening, "reports of the [homebuilding] industry's demise are greatly exaggerated."
In Tuesday's edition of The Wall Street Journal, a front-page story said rising mortgage rates, higher energy costs, bubble fears and rising inventories are driving a slowdown in the housing market.
Centex on Tuesday also announced its earnings outlook for fiscal 2007, saying it expects profit in the range of $10.75 to $11.25 a share, above analyst forecasts. According to a Thomson First Call survey of 11 analysts, the consensus estimate for 2007 is $10.72.
The company reiterated its forecast for 2006 of earnings between $9.65 and $9.85 a share, including 21 cents a share from a one-time tax benefit. Meanwhile, analysts see $9.77 a share.
Although Eller during the conference said short-term fluctuations in the housing market are to be expected on job growth, interest rates, home affordability and consumer confidence, he noted demographics and long-term demand trends are favorable for the big public builders.
"We don't need an expanding [housing] market to grow," he said. "We can do that by increasing marketshare."
He said the largest builders have better access to capital than smaller regional firms, and more know-how to get land entitlements and permits in an increasingly difficult regulatory environment.
"We will not have a national bursting of the bubble, but [rather] a moderation of price increases in the hottest areas, particularly the coastal markets," Centex chief executive officer Lel Echols told investors at the conference.
