Homebuilder Lennar Corp. (LEN,LEN.B) Monday reported a wider loss for the third quarter, hurt by write-downs and charges and a sharp decline in revenues. Lower revenues reflected a decrease in the number of home deliveries and average selling price in the quarter. However, the company believes that it would return to profitability in fiscal 2010.
The company's third-quarter net loss was $171.61 million or $0.97 per share, compared with a net loss of $88.96 million or $0.56 per share, in the same period of fiscal 2008.
Lennar said that the loss per share for the current-year quarter included a $0.42 per share charge related to valuation adjustments and other write-offs and a $0.34 per share charge related to a non-cash deferred tax asset valuation allowance.
On average, 17 analysts polled by Thomson Reuters expected a loss of $0.46 per share for the quarter. Analysts' estimate typically excludes one-time items.
The company reported quarterly total revenues of $720.73 million, down from $1.11 billion in the prior-year quarter. Wall Street analysts projected revenues of $774.36 million.
Homebuilding revenues declined to $643.61 million from $1.02 billion in the previous year. Revenues from home sales decreased 36% in the third quarter to $635.27 million from $995.73 million last year. Revenues were lower primarily due to a 28% decrease in the number of home deliveries, excluding unconsolidated entities, and a 12% decrease in the average sales price of homes delivered in the third quarter of 2009, the company noted.
Financial services revenues were $77.12 million, lower than last year's $90.38 million. Operating earnings for the Financial Services segment were $11.2 million, compared to an operating loss of $12.9 million in the same period last year. In the third quarter of 2008, there was a $27.2 million write-off of goodwill related to the segment's mortgage operations, compared to no write-off in the third quarter of 2009.
Commenting on the results, Stuart Miller, president and chief executive officer of Lennar Corp., said, "During the third quarter, the overall housing market continued its road back to recovery as more confident homebuyers took advantage of increased affordability. While high unemployment and foreclosures will continue to present challenges, consumer sentiment has significantly improved as homebuyers have recognized that the residential housing market is stabilizing."
"While our new orders in the third quarter were down by 8% from the prior year, this is the smallest percentage year over year decline since November 2006. More importantly, our new orders increased sequentially each month during the quarter and we ended the quarter with our highest backlog since August 2008," Miller noted.
The company's new home deliveries, excluding unconsolidated entities, decreased to 2,660 homes from 3,694 homes last year. Average sales price of homes delivered decreased to $239,000 from $270,000 in the same period last year.
Sales incentives offered to homebuyers were $42,200 per home delivered, lower than $45,900 per home delivered a year ago.
Miller also stated that the third-quarter results reflected both a sequential improvement in pre-impairment gross margins of 160 basis points, driven by lower construction costs and declining sales incentives, and a $56 million decrease in S,G&A expenses year-over-year as a result of right-sizing of the company's business. As a percentage of revenues from home sales, selling, general and administrative expenses were 15.9% in the third quarter of 2009 and 15.7% in 2008.
Further, Lennar said that third-quarter losses on land sales totaled $9.4 million, which included $0.6 million of SFAS 144 valuation adjustments and $8.7 million of write-offs of deposits and pre-acquisition costs related to homesites under option that the company does not intend to purchase.
In the third quarter of 2008, losses on land sales reached $28.8 million, including $21.4 million of SFAS 144 valuation adjustments and $10.9 million of write-offs of deposits and pre-acquisition costs related to homesites that were under option.
For the nine-month period, Lennar reported a net loss of $452.72 million or $2.72 per share, wider than a net loss of $298.10 million or $1.88 per share, a year ago. Total revenues plunged to $2.21 billion from $3.30 billion in the same period of fiscal 2008.
Among others in the sector, DR Horton Inc. (DHI) has reported a narrower loss for the third quarter of fiscal 2009, helped by lower charges and a benefit from provision for income taxes. The company's net loss was $142.3 million or $0.45 per share, compared with a net loss of $399.3 million or $1.26 per share in the year-ago quarter. However, quarterly revenues of $914.1 million declined year-over-year reflecting lower home sales and weak net sales orders as market conditions in the homebuilding industry are still challenging.
KB Home (KBH) is set to announce its third-quarter results on September 25. Analysts are of the view that the company will report a loss of $0.59 per share in the quarter on revenues of $457.84 million.
Another peer Pulte Homes Inc. (PHM) is expected to post a loss of $0.54 per share in the third quarter with a revenue estimate of $967.82 million.
"Assuming the economy continues to stabilize, we believe our improved sales environment, increasing pre-impairment gross margins and ability to leverage S,G&A should enable us to return to profitability in fiscal 2010," Miller said.
LEN closed Friday's trading at $16.54. In pre-market trading, the company's shares dropped 0.12%, or $0.02, to $16.58.
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