by Calculated Risk on 10/12/2006 07:41:00 PM

From MarketWatch: Centex slashes quarterly profit forecast (hat tip: Cal)

Centex reported a 28% drop in orders and slashed its fiscal second-quarter profit forecast late Thursday as the home builder suffered from a record level of cancellations.

Net orders for the quarter were 6,828, 28% lower than last year's second quarter, the Dallas-based company said.
...
Second-quarter earnings from continuing operations will now likely be in a range of 65 cents to 75 cents a share. In July, Centex forecast fiscal second quarter earnings from continuing operations of $1.40 a share.

The results reflect "current record levels of home sales contract cancellations," which have been driven by buyers' inability to sell their existing homes, Centex explained.

"The housing market continues to adjust rapidly," Tim Eller, Centex's chief executive, said in a statement. "Cancellation rates that were well outside of historical levels diminished our earnings visibility this quarter."
...
Centex said late Thursday that it's focusing on generating free cash flow and building the strength of its balance sheet to prepare for "strategic reinvestment" when housing market conditions improve.

Record levels of cancellations ... profit cut in half ... focusing on generating free cash flow ... buyers' inability to sell their existing homes. Not good.

UPDATE: The "focusing on generating free cash flow" is a red flag. Sure enough, I pulled up CTX's most recent 10-Q and their balance sheet and cash flow statements are UGLY. When the next 10-Q is released, I'll post an analysis (I have no position in CTX).