Lennar Tops Expectations

Lennar Corp. said profit in its latest quarter soared as an ongoing recovery in the housing market led to an increase in deliveries and higher selling prices for the home builder.

The housing market continued to improve in a slow and steady manner, Chief Executive Stuart Miller said, echoing what the Federal Reserve's monetary policy-setting arm said in its statement last week. Mr. Miller said there is pent-up demand driven by a large production deficit built up over the last several years, an growing millennial population, reasonable affordability levels and high rental-occupancy rates.

For the Miami-based builder, which has been focused on the higher-end first-time buyer and move-up market, deliveries during the quarter increased 16% while the value of new orders rose 20% to $2.3 billion. The average sale price of homes delivered gained 5% to $350,000.

Higher land costs, though, which surged 56% from last year's quarter, offset the higher selling price and pushed Lennar's gross margin down to 24.1% from 25.2%.

New orders, considered an indicator of a builder's future performance, jumped 10% to 6,495 homes.

Like its peers, Lennar has been ramping up incentives to drive sales. In the latest period, Lennar bumped up its average sales incentive by 1.5% from a year earlier to $20,700 for each home closed in the quarter.

In all, Lennar reported a profit of $223 million, or 96 cents a share, up from $177.8 million, or 78 cents a share, a year earlier. Revenue grew 24% to $2.49 billion. Analysts projected 80 cents in per-share profit and $2.42 billion in sales, according to Thomson Reuters.

Shares in the company, up about 16% this year, about double the gain notched by a basket of home builders' stocks, were inactive premarket.

Write to Lisa Beilfuss at [e-mail]

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September 21, 2015 07:15 ET (11:15 GMT)

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