Builder Pain Spreads to WCI

Homebuilder WCI Communities (WCI) said second-quarter earnings would likely disappoint because of dismal orders at many of its high-rise condo and single-family housing communities in Florida.

The Bonita Springs, Fla.-based company said new orders fell 50% in the first two months of the second quarter compared to a year earlier. WCI builds homes in various markets across the East Coast, but it has heavy exposure to the frothy real estate market of South Florida, which the company blamed for much of the order shortfall.

WCI now believes that full-year orders will fall 20% from last year, partly because the company is only releasing three to five new condo towers this year, compared with its prior plan of 11 to 13.

Because of the weak operating environment, WCI expects to report second-quarter earnings below its May 9 projection of 75 cents to 85 cents a share.

WCI joins a chorus of other builders, including Toll Brothers (TOL) and Pulte Homes (PHM), that have either cut guidance or warned about earnings misses due to weak second-quarter order numbers.

"With the near-term environment challenging, due to slower demand and increased resale inventory on the market, the company has taken steps to slow down construction activity and capital spending until there is equilibrium between supply and demand in our markets," WCI President and CEO Jerry Starkey said in a statement.

The company also says it repurchased 2 million shares at an average price of $21.79 each during the second quarter. So far this year, WCI has repurchased 3 million shares and has 2 million shares remaining under its current board authorization.

WCI shares fell 75 cents, or 3.7%, to $19.40 in morning trading Monday.

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