By Helen Chernikoff
NEW YORK (Reuters) - Lennar Corp <LEN.N> reporteda higher-than-expected quarterly profit and a decline in ordersthat was less severe than Wall Street had feared, sending itsshares up more than 5 percent.
Orders fell sharply following the expiration of tax creditsthat boosted home sales last spring. But the decline inLennar's orders was not as grim as the decline for the rest ofthe industry.
"This was going to be the bad quarter, with the end of thetax credit, so there will probably be a relief rally that thenumbers weren't that bad," FBN Securities analyst Joel Lockersaid.
Orders fell 15 percent to 2,624 homes due to the April 30expiration of the tax credit, which induced homebuyers toaccelerate their purchases. The decline was exacerbated byunemployment and foreclosures that present a cheap alternativeto a new home, Chief Executive Stuart Miller said in astatement.
Orders are an indicator of future sales, becausehomebuilders only recognize revenue once they have delivered ahome.
KeyBanc analyst Ken Zener, who has a "buy" rating onLennar, expected a 27 percent decline in orders.
For the third quarter ended Aug. 31, Lennar posted earningsof $30 million, or 16 cents a share, compared with ayear-earlier loss of $171.6 million, or 97 cents per share.
Lennar's earnings beat analysts' expectations of a profitof 6 cents per share, according to Thomson Reuters I/B/E/S.
Because of confusion over Lennar's tax rate, it was notclear whether the company's reported earnings compared exactlywith analysts' estimates. But even the profit of 12 cents ashare, which was adjusted for the tax rate, beat Wall Street'sexpectations.
Nationally, new home sales fell in the mid-20-percent rangeduring Lennar's third quarter.
Revenue rose 14 percent to $825 million, also topping WallStreet's expectations of $777.5 million.
Lennar's earnings benefitted substantially from insurancerecoveries related to the company's use of faulty Chinesedrywall, Wachovia analyst Carl Reichardt wrote in a researchnote.
Without them, he estimates the company would have postedearnings of 7 cents per share.
"While this appears to be a generally better quarter thanwe believe most were expecting from Lennar, the optics somewhatoverstate the accomplishment in our view," Reichardt said.
The tax credit's expiration has disappointed homebuilders,whose sales rebounded earlier this year. Homebuilders had hopedthe rebound reflected improving fundamental demand rather thanjust the tax credits.
Last week, Beazer Homes USA Inc cut its full-yearorder outlook after the expiration of the tax credit, sayingpotential buyers remain cautious amid high unemployment andcontinued foreclosures.
Shares of Lennar were up 7 percent at $14.94 in premarkettrading.
At Friday's close, the shares had lost 36 percent of theirvalue since hitting a 52-week high in April. (Additional reporting by A. Ananthalakshmi in Bangalore;Editingby Lisa Von Ahn and Derek Caney)