Lennar Post Profit for Fourth Quarter
Lennar said Thursday that orders for new homes increased for the first time in more than three years as homebuyers took advantage of lower prices and a federal tax credit.
Lennar also said it posted a profit in its fiscal fourth-quarter earnings as the homebuilder benefited from an adjustment in its income taxes.
Company CEO Stuart Miller said the housing market continued to move toward stabilization during the quarter. Orders of new homes rose 3 percent to 2,652, the first year-over-year increase since the first quarter of 2006.
The surge in new orders comes as first-time homebuyers raced to take advantage of an $8,000 tax credit that had been set to expire at the end of November. That deadline never came, however, as Congress extended the incentive through April and threw in another $6,500 tax credit for repeat homebuyers.
Lennar shares [LEN 14.71 1.01 (+7.37%) ] were up almost 6 percent in premarket trading to about $14.50, from Wednesday’s close of $13.70.
Investors are closely watching major homebuilders like Lennar because their performance is key to the housing market’s recovery, which has been dampened by job losses and tight access to credit for many would-be buyers.
Sales of new homes plunged 11 percent between October and November to the lowest level since April. It was the second monthly drop in three months. Meanwhile, the number of people preparing to buy a home in November also fell sharply.
The big question now for Lennar and the rest of the sector is what happens when the buyer incentives go away a month into the traditional spring homebuying season. In September, Lennar said it would be profitable this year, assuming the economy remains stable.
“For all these builders, including Lennar, we’re trying to see how sustainable these order trends are going to be … after the tax credit expires,” said John Tomlinson, a senior analyst with Majestic Research. “That’s definitely a concern now.”
Lennar said it earned $35.6 million, or 19 cents per share, in the quarter ended Nov. 30. It had a loss of $811 million, or $5.12 a share, a year earlier.
The tax gain reported in the fourth quarter came from a change in federal accounting rules that allowed the company to reverse previous writedowns of deferred tax assets.
Without the tax benefit, the Miami-based homebuilder would have lost $284.9 million, or $1.15 per share. The tax benefit was offset by charges totaling 89 cents per share related to adjustments in the value of land and other write-offs.
Revenue fell 29 percent to $913.7 million from $1.28 billion, due to a 22 percent drop in the number of home deliveries. The average selling price of homes dropped 9 percent to $238,000 from last year’s fourth quarter.
Analysts polled by Thomson Reuters were expecting a loss of 48 cents a share, on average, on $863 million in revenue.
The company improved its cancellation rate compared with last year’s fourth quarter, to 20 percent from 32 percent.
For the full fiscal year, Lennar posted a loss of $417.1 million, or $2.45 per share, compared with a loss of $1.1 billion, or $7 per share, in 2008. Revenue fell 32 percent to $3.1 billion.
Orders for new homes in 2009 dropped 14 percent to 11,510. The cancellation rate improved from 26 percent to 18 percent.
Lennar has operations in 17 states and was ranked the nation’s fourth-largest homebuilder in 2008 by Builder magazine.