Trouble on the Home Front

Centex said net income rose to $329.3 million, or $2.49 a share, for its fiscal third quarter ending Dec. 31, up from $253.8 million, or $1.91 a share, a year earlier. Excluding discontinued items, Centex posted earnings of $332.7 million, or $2.52 a share. Analysts expected earnings of $2.48 a share, according to Thomson First Call.

Revenue rose 25% to $3.74 billion, shy of analysts' forecast of $3.81 billion.

Centex's earnings growth came amid an 18% increase in home closings, which rose to 9,504 units from 8,047, and a 130-basis-point jump in operating margin.

On its conference call, Ryland blamed the overall order slump on its West Coast division, where orders fell 34%. The company said results there were hampered by community opening delays in Las Vegas, along with a slowing Phoenix market and tough year-over-year sales comparisons in the area. The Las Vegas communities have since been opened, and management expects rebounding orders there in the first quarter. Conditions also remained difficult in Colorado. The company said it is bullish on the long-term prospects of each of these markets, however, given strong job-growth trends.

Northern California saw a slowdown because of rising prices in the region, while San Diego and California's Inland Empire had strong sales, Ryland's management said. Washington, D.C., sales also were slow, given the growing inventory in the market, while orders were strong in Florida, Texas, the Carolinas and Atlanta.

Centex also blamed slowing sales in Washington, D.C. on excess inventory in the market, and said pricing growth and sales flattened in Phoenix. The company attributed its 15% order drop in the Southeast to the hurricanes and the company's plan to limit sales to match production delays, namely labor and supply issues The company said sales would have been flat in the region if the company hadn't closed its South Carolina division.