Lennar's 2Q Beat Hints at Housing Strength
Lennar (NYSE:LEN) sold more homes and expanded its order book in the critical spring season, hinting at continued growth in the housing market.
Lennar, the second-largest home builder in the U.S., said Tuesday it delivered 12% more homes in its fiscal second quarter, while the average price of those homes rose 4% year-over-year to $364,000. The Miami-based company also reported a 12% increase in its backlog and a 9.5% jump in new orders, a positive indication of future sales.
Lennar has anticipated “slow and steady growth” in the U.S. housing market, but alongside "a lot of choppiness on the way,” CEO Stuart Miller told analysts during a conference call.
“We still believe very strongly that the trend is upward,” he added.
Miller also noted that each market is experiencing its own housing trends, depending on factors such as local employment. For instance, Lennar’s Houston segment weighed on second-quarter results, largely due to the slowdown for the oil and gas industry.
Earnings for the quarter ended May 31 totaled $218.5 million, up 19% compared to the same period last year. On a per-share basis, Lennar’s profit climbed to 95 cents from 79 cents. Revenue surged 15% to $2.75 billion.
Analysts were looking for a smaller increase in earnings, projecting a profit of 86 cents a share. Revenue also beat Wall Street’s consensus estimate of $2.53 billion.
Lennar’s new orders and heftier backlog are additional signs of the U.S. housing market’s ongoing recovery. Housing activity has been fueled by low mortgage rates, modest wage growth, positive consumer confidence and low unemployment levels, combined with limited inventory, Miller said in Lennar’s earnings report.
Home prices have steadily ticked higher this year, showing annual growth of about 5% in recent months. National prices gained 5.2% during the 12 months through March, according to the latest S&P/Case-Shiller Home Price Index. Portland, Seattle and Denver posted the highest increases in the index that tracks 20 U.S. cities.
Also, more homes were under construction in May than any other month since February 2008, and new-home sales had their best month in more than eight years in April, the U.S. Commerce Department said. According to the National Association of Realtors, existing home sales have posted gains for two consecutive months.
KB Home (NYSE:KBH) is scheduled to report second-quarter earnings after the closing bell Tuesday. Analysts expect the Los Angeles-based home builder to report better earnings and revenue over the year-ago quarter. Wall Street is forecasting revenue of $747 million, which would reflect 20% growth.