Lennar Corp. (LEN) Rises to Yearly High on Earnings Results

Shares of Lennar Corp. (LEN: Charts, News) closed down -1.35 or -3.91 percent to $33.16 per share on Tuesday, after the company reported its fiscal first quarter earnings had declined by -45 percent from its first quarter earnings in 2011. The reason for the sharp decline was due in part to a $37.5 million settlement the firm received in the first quarter of 2011, which made 2012 first quarter earnings seem significantly lower.

Lennar Corp. reported net income of $15 million or $0.08 per diluted share for its fiscal first quarter of 2012 that concluded on February 29th.

This compares to first quarter 2011 earnings of $27.4 million, or $0.14 per share which included the large legal settlement previously mentioned.

According to a survey of thirteen analysts conducted by Zacks Investment Research, the consensus for Lennar's first quarter net income was for the company to earn $0.05 per share. In addition to the better than expected net earnings figure, the company reported increased orders and margins.

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Lennar Corporation, based in Miami, FL, is one of the United States' leading builders of homes for all types of people and lifestyles, from move-up buyers to retirees. The company's line of homes includes homes for retirement communities, urban, suburban and golf course communities, as well homes for active adults.

Despite the apparent drop in net income for the quarter, Lennar Corp reported the highest increase in orders in three quarters with indications of a significant increase in sales activity. The company also reported orders for new homes has been increasing for the last four quarters, indicating improved sentiment towards home purchases in the United States.

Because of low interest rates and increasing costs of renting, more Americans are considering buying a home, which caused Lennar Corp.'s new orders to increase by 33 percent in the December to February period. Recent data, such as the S&P, Case-Schiller index of home prices for 20 major urban areas in the United States, shows prices could be bottoming out, with the index having declined by -3.8 percent in January, compared to a -4.1% decline in December.

Nevertheless, the housing industry is far from being out of the proverbial woods, with an enormous backlog of unsold homes continuing to weigh on the housing market. Last week, KB Home (KBH: Charts, News) surprised the market by reporting a larger than expected quarterly loss, which was attributed in part to order cancelations and smaller margins.

While the housing industry may not be in the process of a complete recovery, Lennar Corp.'s numbers certainly add up to a turnaround. With every aspect of Lennar Corp's business showing percentage increases from +6 percent on operating margins for home sales, to Lennar's deliveries of 2,482 homes in the first quarter, which a 29 percent increase indicate a strong turnaround for Lennar Corp.

Home construction, while representing only a fifth of the total housing market, generally leads the rest of the housing market and signals an improving economy. According to the National Association of Home Builders, the building of each new home creates three jobs on average and generates about $90,000 in taxes.

Lennar Corp. expects to continue showing improved net income in the coming quarters and could give analysts more surprises if the housing market continues to improve.

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Published on Mar 28, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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