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Lennar Q2 net income surges as new home orders climb

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U.S. homebuilder Lennar Corp (NYSE:LEN) said Wednesday that second-quarter net income jumped thanks to a tax adjustment as home deliveries and new orders increased.

For the three months ended May 31, the company earned $452.7 million, or $2.06 per share, up from $13.8 million, or 7 cents a year earlier. The current quarter's earnings included $1.85 per share tied to the partial reversal of the valuation allowance against deferred tax assets.

Less items, earnings were 21 cents per share. Analysts forecast adjusted earnings of 17 cents per share, according to a FactSet survey.

Revenue rose 22 per cent to $930.2 million from $764.5 million, topping Wall Street's estimate of $885.6 million.

"Evidence from the field suggests that the 'for sale' housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process," Lennar CEO Stuart Miller said.

"And while the housing downturn was broad-based and national, the recovery process continues to be very localized.

"Although highly conservative mortgage lending practices and challenging appraisals remain a constant headwind, we are experiencing net positive price and volume trends in most of our markets."

Homebuilders are a bellwether for the housing market and the economy. While new homes represent less than one-fifth of the total housing market, construction of houses has a major impact on the economy.

Lennar said its home deliveries climbed 20 per cent to 3,222 homes, while new orders increased 40 per cent to 4,481 homes.

The average sales price of homes delivered rose to $250,000 from $245,000. Sales incentives offered to buyers were $29,800 per home delivered compared with $33,900 per home delivered in the prior-year period.

The company said that its cancellation rate was at 16 per cent in the quarter, while backlog rose 61 per cent to 3,970 homes.

Revenue for Lennar's Rialto Investments division, which buys troubled loans and properties from banks, fell to $33.5 million from $42.6 million.

"Looking ahead, our strong balance sheet and significant liquidity, which was enhanced this quarter by our new $525 million unsecured revolving credit facility, continue to position us to capitalize on future strategic opportunities," Miller added.

Quick facts: Lennar

Price: 61.08 USD

NYSE:LEN
Market: NYSE
Market Cap: $19.07 billion
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