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Updated from 11:08 a.m. EDT

Shares of

Ryland Group


climbed Thursday after the homebuilder posted third-quarter earnings that topped estimates.

While profits tumbled 26% from a year ago, the company didn't record any land writedown charges, which many analysts and investors expected.

Ryland earned $87.9 million, or $1.97 per share, down from a profit of $118 million, or $2.39 per share, a year earlier. Analysts polled by Thomson First Call had an average estimate for earnings of $1.77 a share.

According to Raymond James analyst Rick Murray, the earnings beat largely was due to a lower-than-expected tax rate and the benefit of land sales.

Total revenue for the quarter fell 10% to $1.13 billion, as home closings fell 15% to 3,688 units. Ryland's new orders in the quarter fell 46% to 2,372 units.

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Gross profit margins from home sales averaged 22.5% for the third quarter, down from 25.7% a year earlier, as the builder stepped up sales incentives.

Though margins were weaker, they were helped by a lack of land writedowns or the abandonment of option deposits, which have hit the profits of other builders recently.

"We expect to see land write-downs once Ryland responds to market conditions with lower prices," Bank of America analyst Daniel Oppenheim said in a research note. Oppenheim rates the company a sell.

Also unlike other builders, who have continuously slashed full-year estimates as the housing market spirals downward, Ryland left its earnings target for the year intact at $7.75 to $8.25 a share.

Shares recently were up $1.40, or 3.2%, to $45.06.

On Ryland's conference call Thursday, CEO Chad Dreier said the company continues to focus on preserving its margins by not aggressively discounting its homes, like its competitors have done. He also noted that inventory has come down in the Northern Virginia part of the Washington D.C. region, which was once the nation's best housing market but has since been weak.

"We are encouraged by a stabilizing Washington D.C. market, and we hope others follow suit," he said.

Despite recent analyst reports noting that the once red-hot markets of San Diego and Sacramento are recovering from speculative excess, Dreier said both market are still oversupplied. If anything, Sacramento might be the better of the two, but he said he doesn't believe that 2007 will be a good year for California.

Meanwhile, parts of southern Florida, like Ft. Myers and Tampa, are still seeing a lot of oversupply from speculators trying to flip the houses they bought in recent years, Dreier said.