Ryland Trims Its Forecast for ’06 Profit a 2nd Time

Home builder Ryland Group Inc. on Wednesday slashed its 2006 earnings forecast for a second time this year, citing a 35% decline in sales in April and May.

The Calabasas-based company said it expected full-year earnings of $8.50 to $9 a share, based on the sale of 16,500 to 17,000 homes at a gross profit margin of 23.2%.

Just a month ago, Ryland lowered its guidance for 2006 earnings to $9.50 a share, based on the sale of 17,500 homes.

The company, the nation’s seventh-largest home builder based on number of homes sold, also projected second-quarter earnings of $1.95 to $2 a share.

Analysts polled by Thomson Financial were expecting per-share earnings of $2.25 for the second quarter and $9.39 for the full year.

Ryland and other large home builders have been feeling the effects of a slowing housing market. The companies have reported lighter traffic, slower price appreciation and higher inventories.

What’s more, investors who helped boost new-home sales in 2004 and 2005 have been fewer in number this year. And prospective buyers are canceling new-home contracts at higher rates because it’s taking longer to sell their existing homes.

“We do not expect Ryland to be alone in announcing sharp declines in orders, and expect more pre-announcements in the coming weeks,” Daniel Oppenheim, a Banc of America Securities analyst, wrote in a note to clients. He rates the stock “neutral.”

In Ryland’s case, the big decline in sales had to do with lower demand, not higher cancellations.

“Management said that the weakness was not concentrated in any geographic region but was widespread,” Oppenheim wrote.

Ryland builds homes in 20 states.

Ryland said first-quarter sales fell 21.2%, with the largest declines in California, Nevada, Arizona and Colorado, where sales dropped a collective 44.3%.

On Wednesday, Ryland shares rose 56 cents, or 1%, to $52.54 in regular trading but fell 49 cents after hours.