Calabasas, CA, October 19, 2006--Ryland Group Inc. after the closing bell Wednesday said third-quarter net income fell over 25% from a year earlier, reflecting continuing weakness in the U.S. housing market.
However, the home builder's shares rose over 5% in after-hours trading on better-than-expected results and news that the company is standing by its earnings outlook for 2006.
The company said quarterly earnings dropped to $87.9 million, or $1.97 a share, from $118 million, or $2.39 a share the previous year. Revenue fell to $1.11 billion from $1.25 billion.
Analysts surveyed by Thomson First Call had forecast earnings of $80.4 million, or $1.77 a share, on revenue of $1.11 billion.
The company attributed the quarterly fall in revenue to fewer home closings, but added that higher average closing prices had somewhat offset the trend. New order dollars plummeted to $673.2 million from $1.33 billion last year, the home builder added.
Earlier this week, Ryland said it named Kipling Scott as chief operating officer, a new position in charge of overseeing the company's home-building, marketing, purchasing and safety operations. Ryland is the nation's eighth-largest builder measured by 2005 deliveries.
The company's shares have followed the home-building group lower this year on slowing activity in the housing market with inventories and cancellations up sharply. Year to date through Tuesday's close, the shares were off 37%.
On Wednesday, the Commerce Department reported a surprising gain in housing starts in September, but building permits dropped to a five-year low.
Some analysts see the decline in permits as a positive that will help the market work its way through excess home inventory.
"We expect starts to decline in coming months as trends converge with recent permit activity," wrote Banc of America Securities analyst Daniel Oppenheim in a note Wednesday.
"However, we expect home prices to continue to decline based on the record and rising existing inventories, which overshadow the new home supply," he added.
In late August, Oppenheim downgraded Ryland shares to sell from neutral on valuation concerns and the expectation that third-quarter profit would fall short of consensus.
On Wednesday, the company said it still expects 2006 earnings to be in the range of $7.75 to $8.25 a share.
