Home-builder Lennar Corp. (LEN: Quote,LEN.B) reported Monday significantly better-than-expected profit in its third quarter on solid profitability in all three business segments. Revenues climbed 34 percent and topped estimates with higher home deliveries and prices.
Lennar's Chief Executive Stuart Miller said, "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. Additionally, reduced foreclosures and declining distressed home inventory are further contributing to the improvement in the housing market."
For the third quarter, net earnings attributable to the company climbed to $87.11 million or $0.40 per share from $20.73 million or $0.11 per share last year.
On average, 23 analysts polled by Thomson Reuters expected earnings of $0.28 per share for the quarter. Analysts' estimates typically exclude one-time items.
Quarterly revenues climbed 34 percent to $1.10 billion from prior year's $820.19 million, while analysts estimated revenues of $1.05 billion for the quarter.
In the homebuilding segment, revenues from home sales increased 33 percent to $932.8 million and operating earnings more than doubled, primarily driven by a 28 percent increase in the number of home deliveries, excluding unconsolidated entities, to 3,655 homes. Average sales price of homes delivered also increased 4 percent to $258 thousand.
In the quarter, gross margin on home sales were 23.2 percent, 210 basis points higher than last year. Operating margin climbed 440 basis points to 11.2 percent.
The company attributed the increase primarily to a greater percentage of deliveries from its new higher margin communities, a decrease in sales incentives offered to home-buyers as a percentage of revenue from home sales, an increase in the average sales price of homes delivered and lower valuation adjustments.
New orders were 4,198 homes, 44 percent higher than last year. Cancellation rate was 17 percent. The company's backlog grew 79 percent to 4,513 homes, and backlog dollar value increased 95 percent to $1.3 billion.
In the financial services segment, operating earnings more than tripled mainly due to increased volume and margins in the segment's mortgage operations and increased volume in the title operations benefited by higher refinance transactions and homebuilding deliveries.
Miller added, "Overall, our third quarter reflects excellent overall results and strengthens the financial position of our company, as we grow volume and drive profitability in a recovering market."
Looking ahead, the company said that in homebuilding, it continues to see strong sales trends translating into increased deliveries, stronger gross margins and improved operating leverage. Sales price increases and incentive reductions should continue to offset the impact of increasing costs, the company added.
In pre-market activity, Lennar shares gained $1.79 or 4.77 percent, and are currently trading at $39.30.
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by RTT Staff Writer
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