Homebuilder Lennar makes money in 3rd quarter on bump in deliveries and shares spike

Lennar returns to profit in 3Q and shares soar

LOS ANGELES — Lennar Corp. returned to a profitable third quarter Monday as strong completed sales helped drive a 14 percent jump in revenue and the homebuilder’s construction costs declined.

But the absence of federal homebuyer tax credits sapped demand in the June-August period and new home orders fell 15 percent.

President and CEO Stuart Miller said June was the slowest month of the quarter, while July and August were “a little less horrible.”

“It’s been a tough summer,” Miller said. “As we’ve gone into September, we’re seeing a little bit of pickup in our traffic, but that shouldn’t be cause to have a sigh of relief at this point.”

Lennar and other homebuilders enjoyed a bump in sales this spring as affordable prices, low mortgage rates and two federal tax credits lured homebuyers into the market. Since the tax credits expired at the end of April, the number of people looking to buy has dropped. Even the lowest mortgage rates in decades have failed to push sales.

The biggest hurdle remains uncertainty over any economic recovery with the country’s unemployment hovering near 10 percent.

The National Association of Home Builders said Monday its index of homebuilders’ confidence in the housing market remains at the lowest level in 18 years for the second month in a row.

Stuart said the housing market recovery will continue to be “rocky and sloppy,” but there are some positive signals.

“There are real buyers out there,” he said. “A modest improvement in the job market and consumer confidence will dramatically improve demand.”

The Miami builder said it earned $30 million, or 16 cents per share, for the three months ended Aug. 31. That compares with a loss of $171.6 million, or 97 cents a share, a year earlier.

Revenue rose 14 percent to $825 million from $720.7 million.

The performance easily beat the expectations of analysts surveyed by Thomson Reuters, who predicted earnings of 5 cents a share on $777.5 million in revenue. These estimates usually remove one-time items.

Management reiterated that it expects to post a profit for the full year.

While some of the other major publicly traded builders have posted a profit of late, they also have seen new home orders drop sharply the deeper they got into the summer. But Lennar’s new home orders didn’t fall as much as some analyst had anticipated, and its shares spiked 8.2 percent, or $1.15, to $15.14.

“While these results clearly don’t point to any real improvement in the demand picture, we believe that Lennar’s ability to continue to show profitability in this slow operating environment will be a positive for the stock,” Barclays Capital analyst Megan McGrath wrote Monday.

The company credited its revenue rise mostly to the increase in completed sales, which rose to 2,909 compared with 2,660 homes in the prior-year period. Average home prices rose slightly to $240,000 from $239,000, while incentives were reduced to $30,600 per home delivered from $42,200.

The company said some areas of Maryland, north Virginia, Raleigh, N.C., Texas and even South Florida are doing better than most of the other markets in the U.S. The builder has seen higher demand in those areas and been able to raise prices in some communities.

Aside from reducing construction costs, the homebuilder also managed to trim its selling general and administrative expenses by 4 percent.

Lennar has operations in 17 states and sells homes for entry level and move-up buyers as well as retirees. It also operates a unit that primarily buys distressed real estate investments.

Online:

Lennar Corp.: www.lennar.com/