(Updates to add cash flow information with analyst quote, details cost-cutting measures. Updates stock price)
By Dawn Wotapka
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Centex Corp. (CTX) might have narrowed its fiscal third-quarter loss, but the builder continues to battle slumping revenue, headline-grabbing impairments and an 80% plunge in orders depressed by an 89% fall in the west.
Such results continue a grim month for home builders struggling to navigate the worst downturn in decades, one only made worse by the continued financial crisis. Because buyers remain afraid to buy, builders have halted most construction, leaving the sector stuck in a string of quarterly losses and its confidence in tatters.
For the quarter ended Dec. 31, Centex, the nation's third-largest builder by closings and revenue, reported a loss of $663.9 million, or $5.34 a share, compared with a year-earlier loss of $975.2 million, or $7.94 a share. "We keep waiting for a catalyst to appear for CTX, unfortunately F3Q09 results are not 'it'," said Fox-Pitt Kelton analyst Rob Stevenson. "While the cash balance continues to climb, operating difficulties are keeping us at an underperform on the stock."
Shares were volatile in early trading, flipping between modest gains and losses. Centex recently gained nearly 5% to trade at $9.62 a share, compared with the Dow Jones US Home Construction Index's slight loss.
Centex's results, announced late Tuesday, included $590 million in impairments and other land charges, while year-ago results included $554 million.
Builders continue to feel the sting from overzealous land acquisitions made during the market's height: Since 2006, builders have taken roughly $30 billion in write-downs as they walk away from land contracts and re-evaluate property already purchased.
Centex's charges came in at the high end of the $550 million to $600 million guidance, and slightly above Credit Suisse Group's (CS) $575 million estimate, the firm said.
It expects $770 million of charges in future quarters "based on the weakness in orders and subsequent adjustments to pricing and incentives," noted analyst Dan Oppenheim.
The loss from continuing operations narrowed to $5.34 a share from $7.95. Revenue crumbled 53% to $872.2 million.
Like all builders, the company said it is working to weather the prolonged slump.
"Although the declining economy caused unprecedented buyer hesitancy early in the quarter, we successfully adjusted to the difficult sales environment," said Chairman and Chief Executive Timothy R. Eller.
Eller said the builder ended the quarter with a "strong" cash position of $1.47 billion and anticipates generating positive operating cash flow in the fourth quarter and for fiscal year 2010.
That's good news for analysts concerned about the industry's cash position as it limps toward recovery.
"We continue to believe Centex has the requisite financial flexibility to withstand the downturn [and] emerge stronger," noted UBS AG (UBS) analyst David Goldberg.
Eller said the company would continue to reduce its cost structure, accelerate overhead reductions and further cut land-related spending.
About half the company's lots in land under development are finished - indicating less money to be spent - and it has shaved 17% from direct construction costs per square foot.
Last month, Centex said orders totaled 1,080, compared with 5,537 a year ago and 2,728 in the second quarter. Closings came in at 3,405, down 49% and 10%, respectively. However, the company also noted better sales volumes in December and January, due to price reductions and incentives.
The average unit sales price slipped 10% to $241,244. That's compared with more than $315,000 in early 2006, according to JPMorgan Chase & Co. (JPM).
Other major builders, including NVR Inc. (NVR), Meritage Homes Corp. (MTH), Ryland Group Inc. (RYL) and D.R. Horton Inc. (DHI) have recently detailed grim quarterly results.
-Dawn Wotapka, Dow Jones Newswires; 201-938-5248; dawn.wotapka@dowjones.com
-John Kell contributed to this report