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Lennar Corp. (LEN)
Lennar Stuns Investors with First Profit in Nearly Three Years
There have been a few industries which have particularly been struggling over these last few years, such as the automobile industry, the financial sector, and of course the housing market. It has been a rough time for homebuyers and sellers, as well as mortgage lenders, and also homebuilders. Lennar is one of the top homebuilding companies in the nation, and they were hit hard by this housing crisis. Today, the company reported its fourth quarter report, and the unexpected results shocked investors and analysts.
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As background information, Lennar has not been able to post a profit since the beginning of 2007. Additionally, the company has not seen a year-over-year increase in orders of new homes since 2006. Analysts were expecting that the company could possibly return to profitability at the end of 2010. However, Lennar stunned everyone by reporting a fourth quarter profit for 2009! The company reported a profit of $35.6 million, or 19 cents a share, a huge improvement from the previous year's fourth quarter loss of $5.12 per share. The company also revealed that new home orders rose 3% from last year, rising to 2,652. The company's revenue dropped 29% to $1.28 billion, as both home deliveries and average home prices fell. Analysts had anticipated a loss of 48 cents per share, and revenue of $863 million.
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Although the numbers sound fantastic, there is some reason to remain cautious. First, the primary reason that the company was able to report a profit was due to a change in taxation laws. With the new law, the company was able to include a tax gain into their fourth quarter results; without this benefit, the company would have posted a loss of $1.15 per share. Secondly, the largest reason for the increase in new homes orders was that the first-time homebuyers tax credit was set to expire in November. This caused a number of homebuyers to rush to purchase their homes before the credit expired (although at the last minute, the tax credit was actually extended through April).
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Despite this, the company's stock has been trading up over 10% in morning trading. The company has remained optimistic that they can maintain profitability this year. Analysts seem to be taking a more cautious stance than investors, calling Lennar's gains "modest," and warning that it is still uncertain how the housing market will react to the elimination of the homebuyers tax credit in April. Furthermore, foreclosures still remain an impending concern for all homebuilding companies. However, regardless of the way it managed to do so, the company was indeed able to post a profit, while many of their competitors including Toll Brothers (TOL: Charts, News, Offers) still are posting losses. Although the company still has many more hurdles to overcome, this report could indicate that the company is building themselves up once again.
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Lennar Commentary:
Homebuilder reports first profits since '07 - Lennar posted its first profit since 2007; here is a graph which shows the company's profits and losses quarter by quarter.
Live Blogging: Stuart Miller on Lennar - The Wall Street Journal live blogs the conference call with Lennar's CEO Stuart Miller.
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More Stocks in the News:
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Timeline: Saab future hangs in balance - The fate of the Saab brand could be decided today, as bidders are trying one more time to purchase Saab before General Motors decides to shutdown the brand.
GameStop Reports Weak Holiday Video Game Sales - Gamestop (GME: Charts, News, Offers) reported disappointing holiday sales, sending shares down over 15% in morning trading.
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Profile |
Click here to view a detailed profile of Lennar Corp..
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