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Lennar Q1 Profit Declines, Despite Higher Deliveries; Sees Profitable 2012


Home-builder Lennar Corp. (LEN,LEN.B) on Tuesday posted a reduction in profit for its first quarter of fiscal 2012, as prior year's results benefited by a litigation settlement. Quarterly earnings per share and top line beat Street estimates helped by higher home deliveries, selling prices as well as tight cost controls.

Looking ahead, the company expects the strategic investments in home-building and Rialto segments will lead the way to third consecutive profitable year in 2012.

Noting that its the eighth consecutive quarter of profitability, Chief Executive Officer Stuart Miller said the company was profitable in each of its business segments. Lennar recorded the strongest first quarter home-building operating margins in six years and its strongest first quarter sales since 2008, with new orders increasing 33 percent.

Peer KB Home (KBH) on last Friday reported a narrower loss for the first quarter reflecting 21 percent increase in home deliveries and 6 percent higher selling prices. However, company-wide net orders declined 8 percent from last year. The Los Angeles, California-based home builder expects to achieve profitability later in the year.

For its first quarter, Lennar's net earnings attributable to the company was $14.97 million or $0.08 per share, lower than last year's $27.41 million or $0.14 per share that included $37.5 million or $0.19 per share relating to the receipt of a non-recurring litigation settlement. On average, 23 analysts polled by Thomson Reuters expected earnings per share of $0.04 for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues improved 30 percent to $724.86 million from $558.04 million in the prior-year quarter, while 15 analysts estimated revenues of $699.38 million for the quarter.

In the home-building segment, revenues from home sales increased 33 percent primarily due to a 3 percent increase in the average sales price to $246 thousand and 29 percent increase in deliveries to 2,482 homes with a dollar value of $614.62 million.

New orders grew 33 percent to 3,022 homes with a value of $763.33 million. Miller said, "New sales orders in the first quarter were encouraging. We have seen the market stabilize, driven by a combination of low home prices and low interest rates, making the decision to purchase a new home more attractive, compared to the heated rental market."

Cancellation rate was 18 percent for the quarter. Backlog as of February 29 was 2,711 homes with $711.39 million in value, 39 percent higher than prior year.

Gross margin on home sales improved 90 basis points to 20.9 percent and operating margin on home sales improved 240 basis points to 6 percent benefited greatly from strategic capital investments in new higher margin communities.

"During the quarter, we continued to manage our home-building business carefully with tight controls over our costs and an intense focus on improving our gross margins," the company said in its statement.

In the Financial Services, operating earnings climbed from last year, while Rialto Investments unit, which buys distressed real estate investments, generated lower revenues and operating earnings.

Lennar shares are gaining $1.10 or 4.17% in pre-market activity, and currently trading at $27.50.

by RTTNews Staff Writer

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