Lennar (NYSE:LEN) disclosed a 70% tumble in second-quarter profits on Tuesday, but the home builder still managed to blow away forecasts and its new orders soared 27% thanks to the recovering real-estate market.
Shares of Miami-based Lennar rallied more than 5% in premarket trading as both top and bottom-line results trumped consensus calls from analysts.
The No. 3 U.S. home builder said it earned $137.4 million, or 61 cents a share, last quarter, compared with a profit of $452.7 million, or $2.06 a share, a year earlier.
The latest quarter includes a gain of 18 cents a share tied to a partial reversal of state deferred tax valuation allowance. Analysts had been calling for EPS of 33 cents.
Lennar said its revenue soared 53% to $1.43 billion, topping the Street’s view of $1.33 billion. Gross margins expanded to 24.1% from 22.5%
Deliveries increased 39% to 4,464 homes, solidly exceeding estimates by analysts surveyed by StreetAccount for 4,318. Average selling price of new homes delivered enjoyed a 13% rise.
Orders, a closely-watched metric in the housing industry, rose 27% to 5,705 homes, compared with consensus calls from analysts polled by StreetAccount for 5,792 homes.
“Demand in all of our markets continues to outpace supply which is constrained by limited land availability and fewer competing homebuilders,” CEO Stuart Miller said in a statement. “Affordability remains high and despite recent interest rate increases, we have seen very little impact on sales or pricing."
Lennar’s backlog of homes jumped 55% to 6,163 homes. The dollar value of the backlog surged 76% to $1.9 billion.
While acknowledging that “conflicting” economic indicators and higher rates “can create headline risk” to the recovery, Miller said the next round of the housing recovery continues to “show strength” and Lennar is poised for another year of housing profitability.
Wall Street cheered the upbeat tone of Lennar’s report, bidding the company’s shares 5.32% higher to $36.85 in premarket trading Tuesday morning. The rally should eat into Lennar’s 9.5% decline so far this year, which compares poorly with the S&P 500’s 10% gain.
Shares of other home builders such as KB Home (NYSE:KBH) and D.R. Horton (NYSE:DHI) followed Lennar’s stock higher during early trading.