Lennar Corp. (LEN) reported second-quarter operating results on Tuesday that beat analyst predictions on the top and bottom line, thanks in part to rising new home deliveries and a partial reversal of state deferred tax asset valuation allowance.
For the quarter ended May 31, Miami, Florida-based Lennar reported revenue of $1.43 billion, up 53 percent from $808.1 million in the year prior quarter. Net earnings totaled $137.4 million, or 61 cents per share, compared to $452.7 million, or $2.06 per share, in the second quarter last year. Net income for the latest quarter included a partial reversal of the deferred tax asset valuation allowance of $41.3 million, or 18 cents per share, while the year earlier quarter benefited from deferred tax assets by $403.0 million, or $1.85 per share. Excluding the tax benefit in the latest quarter, Lennar earned 43 cents per share.
Wall Street was expecting Lennar to only report earnings per share of 33 cents on revenue of $1.33 billion.
The improvements were broad based for Lennar, the third largest U.S. homebuilder. Deliveries of new homes rose 39 percent to 4,464. New orders climbed 27 percent to 5,705 homes. Backlog swelled 55 percent to 6,163 homes with a 76-percent jump in dollar value to $1.9 billion.
Gross margin was 160 basis points better at 24.1 percent. Selling, General and Administrative costs as a percentage of home sale revenue improved 230 basis points to 10.9 percent, marking the first time they have been under 11 percent since Q3 in 2006.
Operating earnings for Lennar’s financial services unit grew to $29.2 million from $18.0 million in the year prior quarter.
"Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second quarter results together with real time feedback from our field associates continue to point towards a solid housing recovery,” said Stuart Miller, chief executive of Lennar. Miller added that high affordability levels and overall supply shortages continue to drive the homebuilding industry.
The company also said that during the economic downturn Lennar was actively buying land, leaving them well positioned going forward.
Homebuilders have taken a hit in the past month with chatter about the Federal Reserve potentially slowing and then ending its economic easing policy of buying $85 billion each month in Treasuries and mortgage-backed securities and eventually raising ultra-low interest rates that could stifle the strong recovery of the housing markets. Shares of LEN have jettisoned more than 20 percent in 30 days as a result, after being ahead about 70 percent in the past year leading into May highs at $44.40.
The Commerce Department will deliver today a report on new home sales for May, with economists expected the annualized pace to rise from 454,000 in April to 462,000 in May. That’s about 25 percent above May 2012 levels.