Lennar Profit Beats Estimates as Jobs Gains Spark Buying

Updated on

Lennar Corp., the second-largest U.S. homebuilder, rose the most in five months after reporting higher-than-expected earnings for its fiscal second quarter as the revived U.S. economy spurs new housing demand.

Net income for the three months through May was $183 million, or 79 cents a share, compared with $137.7 million, or 61 cents, a year earlier, the Miami-based company said in a statement Wednesday. The average estimate of 12 analysts was for earnings of 64 cents a share, data compiled by Bloomberg show.

U.S. builders have been expecting sales to improve as the economy strengthens, low mortgage rates help make purchases affordable and millennials move into their prime homebuying years. New-home sales in May rose to the highest rate since February 2008, the Commerce Department reported Tuesday. Lennar’s orders for the quarter increased 18 percent from a year earlier to 7,271 homes, while the value of orders climbed 28 percent.

“We believe that the robust growth in new orders will translate into a strong second-half 2015 estimated deliveries and solid earnings performance,” Robert Wetenhall, an analyst with RBC Capital Markets LLC, said in a note to clients after earnings were released. “Management believes that the homebuilding market is ‘well-positioned’ for continued growth driven by higher wages and employment, high levels of affordability, supply shortages and favorable monthly payments when compared to rentals.”

Shares of Lennar climbed 4.2 percent to close at $51.06, the biggest one-day advance since Jan. 7. They’re up 14 percent this year, compared with an 11 percent increase for the 22-company Bloomberg index of homebuilders.

Revenue, Margins

Revenue rose 32 percent from a year earlier to $2.4 billion. Lennar’s gross margin on home sales was 23.8 percent, compared with 23.1 percent in the fiscal first quarter and 25.5 percent a year earlier.

Lennar builds homes for first-time and move-up buyers, retirees and multiple-generation households in 17 states. It also invests in apartments, master-planned communities, mortgage financing and commercial real estate.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE