Lennar Profit Beats Estimates as Home Prices Increase
Lennar Corp., the second-biggest U.S. home-builder by market value, reported a quarterly profit that beat analysts' estimates as it increased prices and earnings jumped at its Rialto Investments division.
Net income was $164.1 million, or 73 cents a share, for the fiscal fourth quarter ended Nov. 30, compared with $124.3 million, or 56 cents, a year earlier, the Miami-based company said in a statement Wednesday. Analysts expected earnings of 62 cents a share, the average of 19 estimates compiled by Bloomberg.
Publicly traded builders have been cutting costs, increasing prices and adding lots to take advantage of the housing recovery. Lennar's gross margin, a measure of profitability, rose to the second highest in its history as the company reduced incentives and sold homes at higher values.
"The beat was driven by better deliveries and gross margin, which came in ahead of expectations, as well as better Rialto earnings," Jack Micenko, a New York-based analyst at Susquehanna International Group LLP, said in a note to clients.
Rialto, which invests in distressed real estate, reported operating earnings of $15.6 million, up from $4.8 million a year earlier, including earnings attributable to noncontrolling interests.
Lennar stock lost 9 percent this year through Tuesday, compared with a 1.2 percent decline for the 11-company Standard & Poor's Supercomposite Homebuilding Index.
Net income in the quarter included a $94 million tax provision compared with an $18.5 million credit a year earlier.
Lennar's orders climbed 13 percent to 4,498 homes. Revenue rose to $1.92 billion from $1.35 billion a year earlier as the number of houses delivered increased 27 percent. The average sale price was $307,000, up 18 percent.
Rising mortgage rates, political uncertainty and price increases contributed to a slowdown in orders, Lennar chief executive officer Stuart Miller said in the statement. In the fourth quarter of 2012, orders rose 32 percent from a year earlier.
Mortgage rates surged to a two-year high in August from near-record lows in May, causing some would-be buyers to hold back. Borrowing costs have retreated since then, with the 30-year average at 4.42 percent, down from 4.58 percent on Aug. 22, according to McLean, Va.-based Freddie Mac.