Lennar Earnings Beat Analysts’ Estimates as Revenue Jumps
Lennar Corp. (LEN), the largest U.S. homebuilder by market value, reported fiscal fourth-quarter earnings that beat analysts’ estimates as revenue jumped 42 percent and profit margins climbed.
Net income for the three months through Nov. 30 rose to $124.3 million, or 56 cents a share, from $30.3 million, or 16 cents, a year earlier, the Miami-based company said today in a statement. The results included a net tax benefit of $18.6 million. The average estimate of 20 analysts in a Bloomberg survey was for earnings of 45 cents a share.
U.S. builders are seeing rising sales as record-low interest rates and a shrinking supply of existing homes on the market spur demand for new homes. Lennar improved its gross margin, a measure of profitabiliity, as it decreased promotions and sold houses at higher prices.
The company had a “solid quarter led by stronger gross margins on falling incentives,” Kenneth Zener, an analyst with KeyBanc Capital Markets Inc. in San Francisco, wrote in a note to clients. “Builders are still benefiting from a nascent recovery.”
The National Association of Home Builders/Wells Fargo index of confidence probably rose for a ninth straight month in January to 48, the highest since April 2006, according to the average estimate of 49 economists surveyed by Bloomberg. The data are due tomorrow. CoreLogic Inc. reported today that U.S. home prices jumped 7.4 percent in November from a year earlier, the biggest increase since May 2006.
Excluding tax gains, Lennar’s earnings would have been 47 cents a share, Adam Rudiger, an analyst with Wells Fargo & Co. in Boston, wrote in a note to clients.
“The headline EPS beat was largely driven by tax benefits,” Rudiger wrote. “We are somewhat concerned that elevated investor expectations in the face of more difficult order comparisons in 2013 may make further share gains more difficult to come by.”
Lennar slipped 2.3 percent to $40.06 at 9:59 a.m. in New York. The shares gained 97 percent in 2012, compared with an 84 percent advance for the Standard & Poor’s Supercomposite Homebuilding Index (S15HOME) of 11 companies.
Revenue rose to $1.35 billion in the fourth quarter from $953 million a year earlier. New orders increased 32 percent to 3,983 homes. Contract backlog, an indication of future sales, jumped 87 percent to 4,053 homes. The average selling price of homes delivered climbed to $261,000 from $243,000.
Gross margins on home sales jumped to 23.5 percent from 19.4 percent a year earlier.
“Our fourth quarter reflects the recovery in housing with solid profitability in all of our business segments,” Chief Executive Officer Stuart Miller said in the statement. “As we head into 2013, we are extremely well positioned to gain market share in a recovering market.”
The company’s Rialto Investments segment, which invests in distressed real estate, reported operating earnings of $4.6 million, down from $8 million a year earlier. That was weaker than expected, Megan McGrath, an analyst with MKM Partners LLC, wrote in an e-mail. The results indicate declining revenue and increased costs associated with owning and managing properties, Rudiger said.
Lennar also said it is investing in the multifamily segment, with a pipeline of more than $1 billion to be developed in the next three years.
Apartment demand has surged in recent years as millions of people forced out of their houses by foreclosure switched to renting, and stricter mortgage requirements made it harder for potential homebuyers to obtain loans. The U.S. apartment-vacancy rate was 4.5 percent in the fourth quarter, an 11-year low, Reis Inc. (REIS) reported last week.
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