Homebuilder Lennar Earnings Rise on Improved Demand

In the second quarter of 2013, EPS was increased by $0.18 per share on a one-time tax benefit.

Revenue from new home sales rose 28% compared to the second quarter of 2013, primarily as a result of a 12% increase in the number of deliveries and a 14% increase in the average price. Lennar delivered 4,976 homes in the second quarter, well above the 4,449 delivered in 2013. Sales incentives rose slightly from $20,200 a year ago to $20,300 in the second quarter of this year to $20,200. In the second quarter of 2013 the average sales incentive was nearly $30,000.

The company’s CEO said:

While the spring selling season was softer than anticipated by us and the investor community, the homebuilding recovery continued its progression at a slow and steady pace. The fundamentals of the homebuilding industry remain strong driven by high affordability levels, favorable monthly payment comparisons to rentals and overall supply shortages. Demand in most of our markets continues to outpace supply, which is constrained by limited land availability.

Complementing our core homebuilding business, our multifamily rental segment has continued to mature. With a geographically diversified pipeline exceeding $4 billion and 17,000 apartments, this segment is positioned to become a meaningful contributor to our earnings. We expect to sell our first apartment community in the third quarter and should begin to have a more consistent pattern of apartment property sales, starting in the second half of 2015.

The company offered no guidance, but reported that its backlog of new homes at the end of the second quarter totaled 6,858, up 11% from the same period a year ago. The backlog’s dollar value totals $2.4 billion, up 26% from the same period a year ago. The consensus estimates for the third quarter call for EPS of $0.77 on revenues of $2.2 billion. For the full year, analysts forecast EPS of $2.50 on revenues of $7.59 billion.

Shares rose about 1.8% in premarket trading to $42.27, in a 52-week range of $30.90 to $44.40. Thomson Reuters had a consensus analyst price target of around $43.60 before the results were announced.

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