Homebuilding Continues to Thrive (LEN)

Lennar Corp. (NYSE: LEN) this morning reported fiscal third-quarter 2012 earnings per share (EPS) of $0.40 on revenue of $1.1 billion. In the same period a year ago, the homebuilder reported EPS of $0.11 on revenue of $820 million. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.28 and $1.05 billion in revenue.

The company’s CEO said:

The housing market has stabilized and the recovery is well underway. Low mortgage rates, affordable home prices, increased buyer confidence and an extremely favorable rent-to-own comparison are driving growth in each of our markets. Additionally, reduced foreclosures and declining distressed home inventory are further contributing to the improvement in the housing market.

The company did not offer any guidance, but the consensus estimate for fiscal fourth-quarter EPS is $0.38 on revenue of $1.22 billion. For the full fiscal year ending in November, EPS is estimated at $2.81 on revenue of $3.9 billion.

Deliveries of new homes rose 28% over the same period a year ago, and selling prices were up nearly 4.5%. New orders are up 44% and order backlog is up a whopping 79%. The dollar value of the backlog is up an astounding 95%.

Gross margins also rose, from 21.1% last year to 23.2% this year. Lennar said the improvement in gross margins was due primarily to a greater percentage of deliveries at the company’s higher margin communities, a drop in sales incentives, the increase in average selling price and lower valuation adjustments.

The impact of the Federal Reserve’s planned purchase of $40 billion a month worth of agency mortgage-backed securities could raise demand for homes by pushing mortgage rates down even further. Homebuilders like Lennar can take advantage of the low rates by raising their sales prices.

The company’s shares are up 6.2% in premarket trading this morning, at $39.83, a new 52-week high if it holds. The current 52-week range is $12.14 to $37.88. Thomson Reuters had a consensus analyst price target of $31.71 before morning’s report.

Paul Ausick