A second homebuilder has reported fourth quarter and full-year earnings that handily beat very low expectations. Lennar Corp. (NYSE: LEN) reported this morning that it had quarterly EPS of $0.17 on revenue of $860.1 million. Analysts had been expecting EPS of $0.02 on revenue of $760 million.

Like KB Home (NYSE: KBH), which reported earnings last week, Lennar skipped over a very low bar. Not much is expected of other builders reporting later this month and next. Ryland Group Inc. (NYSE: RYL) reports earnings on January 26th and is expected to post an EPS loss of -$0.35 on revenue of $232.3 million. DH Horton Inc. (NYSE: DHI) reports on January 31st and analysts are estimating an EPS loss of -$0.03 on revenue of $796.1 million. PulteGroup Inc. (NYSE: PHM) reports on February 1st, and is expected to post an EPS loss of -$0.09 on revenue of $1.12 billion. Toll Brothers Inc. (NYSE: TOL) reports earnings on February 21st, and is expected to post an EPS loss of -$0.07 on revenue of $319 million.

Lennar noted that its Rialto Investments business contributed $12.4 million in operating earnings for the quarter, mostly from its 49% share in a portfolio of real estate loans it acquired with the help of the FDIC. Operating income from the company’s financial services division totaled $11.7 million. That’s about 62% of the company’s total operating earnings before taxes. For the year, non-building segments contributed $88.6 million of $94.73 million in pre-tax earnings.

As for Lennar’s homebuilding business, new orders dropped -5% and deliveries dropped -12% in the quarter. Average sales price was flat at $238,000, even though buyers’ incentives dropped from 13.2% to 12.4%. Lennar’s backlog fell to 1,604, which had the effect of widening the company’s gross margin from 11.1% to 17.7%.

The Wall Street Journal cites a UBS analyst who believes Lennar is well-positioned to enter 2011 because “its operating acumen, combined with opportunities from Rialto, should allow for profitability even if the broader market declines.”

In other words, Lennar doesn’t have to build and sell houses to make money. KB Home’s quarterly profits came from a significant reduction in the company’s SG&A expenses. People aren’t buying many houses, so the imaginative homebuilders are finding some other way to make profits. It will be interesting to see how the other builders jump over their very low bars.

Lennar shares are up about 5.7%, to $19.97, within the 52-week range of $11.93-$21.79. The other homebuilders are also ticking up on the report from Lennar. The SPDR S&P Homebuilders ETF (NYSE: XHB) is also up more than 1%, to $17.91 in the first hour of trading this morning.

Paul Ausick

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