Lennar Earnings Rise on Sales, Price Increase

Revenue from new home sales rose 22%, compared with the third quarter of 2014, to $2.2 billion, primarily as a result of a 16% increase in the number of deliveries and a 5% increase from $332,000 last year to $350,000 in the average price. Lennar delivered 6,314 homes in the quarter, well above the 5,450 delivered in the same quarter of 2014.

Sales incentives rose from $20,300 a year ago to $20,700 in the third quarter of this year. In the second quarter of 2015, the average sales incentive was $21,500. As a percentage of the sales price, incentives fell from 5.8% per home in the year-ago and prior quarters to 5.6%.

The company’s CEO, Stuart Miller, said:

The new home and rental markets continued to have significant pent-up demand, which positions us well for years to come. This demand is driven primarily by a large production deficit built up over the last several years, an increasing millennial population, reasonable affordability levels and high-rental occupancy rates. … Our core homebuilding business continued to produce strong operating results in the third quarter. Gross and operating margins were 24.1% and 14.1% in the third quarter, respectively. Our average sales price of homes delivered increased 5% year-over-year to $350,000, from $332,000 in the third quarter of 2014. Our new home deliveries increased 16% in the third quarter, while our new home orders increased a solid 10%, compared to the same period last year. Our sales backlog dollar value increased 22% from the third quarter of last year to approximately $3.0 billion, keeping us well positioned going forward.

The company offered no guidance, but reported that its backlog of new homes at the end of the quarter totaled 8,250, up 10% from the same period a year ago. The backlog’s dollar value totals $3 billion, up 22% from the same period a year ago. The consensus estimates from MarketWatch for the current quarter call for EPS of $0.81 and full-year EPS of $3.25.

Shares closed Friday at $51.75, in a 52-week range of $37.50 to $56.04. MarketWatch had an average analyst price target of $53.36 before these results were announced.

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