Lennar Corporation Exceeds Expectations Besides for Rialto Unit

Lennar Corporation Exceeds Expectations Besides for Rialto Unit

Lennar Corporation (NYSE:LEN), the third-largest U.S. homebuilder by revenue, reported a four times increase in fiscal third-quarter profit, owing to a surge in demand for new houses. Only Rialto was a disappointment according to most analysts.

Lennar Corporation Exceeds Expectations Besides for Rialto Unit

The Miami-based company’s net income for the quarter ending Aug. 31 jumped to $87.1 million, or 40 cents a share, from $20.7 million, or 11 cents, a year earlier. EPS of 40 cents a share beats the analyst’s estimates of 28 cents. Revenue for the period rose to $1.1 billion from $820.2 million a year earlier. New orders witnessed a 44 percent increase to 4,198 homes. Contract backlog, which hints on the upcoming sales, was up 79 percent to 4,513 homes. Also, the average selling price of the homes delivered, increased to $258,000 from $247,000 a year earlier. Lennar’s gross margins on home sales of 23.2% were higher than the estimates of 21 percent to 22 percent. However, the company’s results were affected by weak results at Rialto, which incurred an operating loss of $5.7 million. The company was able to reverse an incremental $44MM ($0.20/share) of its valuation allowance against its DTA (Deferred Tax Assets).

This Hedge Fund Believes The New Real Estate Cycle Is “Well Underway”

REITChilton Capital's REIT Composite was up 6.1% last month, compared to the MSCI U.S. REIT Index, which gained 4.4%. Year to date, Chilton is up 6.3% net and 6.5% gross, compared to the index's 8.8% return. The firm met virtually with almost 40 real estate investment trusts last month and released the highlights of those Read More

“The housing market has stabilized and the recovery is well under way,” Lennar Corporation (NYSE:LEN) Chief Executive Officer Stuart Miller said in the statement. “Low mortgage rates, affordable home prices, increased buyer confidence, and an extremely favorable rent-to-own comparison are driving growth in each of our markets.”

The surge in demand for new homes, despite a tight supply of existing properties, is the result of low mortgage rates that attracted the buyers towards new homes. New single-family homes saw the highest surge in demand with 535,000 in August, the highest since April 2010, when buyers rushed to take advantage of federal tax credits designed to stimulate the market.

“Lennar turned in a very solid quarter,” Stephen East, an analyst with International Strategy & Investment Group LLC, said in a note to clients today. “There should be little doubt this builder is driving its homebuilding operations faster than most of its peers.”

The entire industry has been reaping benefits from the surge in demand for homes. Other builders like KB Home (NYSE:KBH), based in Los Angeles, also reported an unexpected profit and increased revenues for the third quarter. The company’s stock has climbed 16 percent, the most since 2008.

The Miami based Lennar Corporation (NYSE:LEN)’s stock was up 4 percent in New York premarket trading. This year up till 21st September, Lennar shares have gained 91 percent, against 87 percent of the 11-member Standard & Poor’s 1500 Homebuilding Index. (S15HOME).

Goldman Sachs (NYSE:GS) notes:

Overall: Lennar performed well in its core homebuilding operations, with orders, margins, the top line and the bottom line beating consensus expectations. However, the company’s results were affected by weak results at Rialto, which incurred an operating loss.

No posts to display