Lennar Beats Estimates, Ramps Up for First-Time Buyers

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Lennar Corp. (NYSE: LEN) reported second-quarter fiscal 2016 results before markets opened Tuesday. The homebuilder posted quarterly diluted earnings per share (EPS) of $1.01 on total revenues of $2.83 billion. In the same period a year ago, Lennar reported EPS of $0.96 on revenue of $2.49 billion. Second-quarter results also compare to consensus estimates for EPS of $0.89 and revenues of $2.68 billion.

Quarterly revenue from new home sales rose 11% compared with the third quarter of 2015 to $2.4 billion, primarily as a result of a 7% increase in the number of home deliveries, excluding unconsolidated entities, and a 3% increase in the average sales price of homes delivered. Lennar delivered 6,758 homes in the quarter, compared with 6,314 delivered in the same quarter of 2015.

Sales incentives increased from $20,700 a year ago to $22,500 in the third quarter of this year. In the second quarter of 2016, the average sales incentive was $21,800. As a percentage of the sales price, incentives rose from 5.6% per home in the year-ago quarter to 5.9%.

The company’s CEO, Stuart Miller, said:

While the housing market’s recovery has continued to progress on a slow, steady and sometimes, choppy path, we have continued to manage our sales and delivery targets in the 7% – 10% range, while focusing on bottom-line profitability and balance sheet strength. … Our core homebuilding business continued to produce solid operating results in the third quarter of 2016 as our operating margin was 13.2%, notwithstanding a lower gross margin in the quarter, as expected. We continue to see benefits stemming from our focus on S,G&A generally, and digital marketing in particular, which helped to reduce S,G&A as a percentage of home sales revenues to 9.3%. … We have continued to focus our land spend on high quality, ‘A’ locations while also ramping up our first-time homebuyer land positions as that segment of the market continues to improve.

The company offered no guidance, but reported that its backlog of new homes at the end of the quarter totaled 9,253, up 12% from the same period a year ago. The dollar value of the backlog rose 14% to $3.4 billion.

Shares closed Monday at $45.09, in a 52-week range of $37.14 to $52.50, and traded up nearly 3% at $46.33 in Tuesday’s premarket session.

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