Lennar Hits Highest Since 2007 as Income Beats Estimates
Lennar Corp. (LEN), the third-largest U.S. homebuilder by revenue, rose to its highest since September 2007 after reporting net income that beat estimates and a 33 percent increase in new home orders.
Net income for the three months ended Feb. 29 fell to $15 million, or 8 cents a share, from $27.4 million, or 14 cents, a year earlier, when the company booked a $37.5 million legal settlement, the Miami-based company said today in a statement. Lennar was expected to earn about 5 cents a share, the average estimate of 20 analysts in a Bloomberg survey.
The company “turned in results that met, or exceeded, our expectations on nearly every metric,” Stephen East, an analyst with International Strategy & Investment Group LLC in St. Charles, Missouri, wrote in a note today. “We cannot emphasize enough that the Street’s expectations had grown sharply in the last week or so, yet the results surpassed those as well.”
Lennar climbed 4.7 percent to $27.63 today in New York, its highest close since Sept. 5, 2007. It was the day’s biggest gainer in the 11-member Standard & Poor’s 1500 Homebuilding Index (S15HOME), which rose 2.9 percent. Builders Ryland Group Inc. (RYL) and Standard Pacific Corp. (SPF) also increased more than 4 percent today.
Purchases of new homes have begun to rebound from a record low in 2011 as the unemployment rate falls and consumer confidence increases. New houses sold at an annual pace of 313,000 last month, the Commerce Department reported March 23, up 11 percent from February 2011 while down 1.6 percent from January and lower than economists’ estimates.
Buyers “are starting to feel pressure not to miss this moment,” Chief Executive Officer Stuart Miller said today during a conference call with analysts. “The fully-loaded cost of ownership is lower in the most-desirable markets than comparable rental rates.”
Lennar’s total revenue for the quarter climbed to $724.9 million from $558 million a year earlier. Analysts expected a figure of about $700 million.
Orders increased to 3,022 homes, up from 2,267 a year earlier. The backlog of homes under construction, another indicator of future revenue, rose to 2,711, a 39 percent increase from a year earlier. The average price of a home delivered rose to $246,000 for the quarter, up 3 percent from a year earlier.
“The company highlighted its ability to convert rising sales-per-community into price increases and reduced incentives,” Stephen Kim, an analyst with Barclays Capital Inc. in New York, wrote in a note today.
Lennar, which has reported a profit in every period since the second quarter of 2010, trades distressed real estate and notes through its Rialto Investments unit to supplement its homebuilding revenue.
The company spent $212 million to buy 4,225 home sites during the quarter and $61 million to develop land for construction, up a combined 34 percent from a year earlier. About 39 percent of the purchased land was in Florida, 22 percent in Texas and 14 percent in the Pacific Northwest, with the balance spread around the country.
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