Lennar Corp., the third-largest U.S. homebuilder by revenue, said its quarterly profit more than quadrupled as demand for new houses climbed and a real estate recovery gained traction.
Net income for the three months ended Aug. 31 rose to $87.1 million, or 40 cents a share, from $20.7 million, or 11 cents, a year earlier, the Miami-based company said today in a statement. The average estimate of 19 analysts in a Bloomberg survey was for earnings of 28 cents a share.
Purchases of new homes in the U.S. have begun to rebound as low mortgage rates help lure buyers amid a tight supply of existing properties.
“The housing market has stabilized and the recovery is well under way,” Lennar Chief Executive Officer Stuart Miller said in the statement. “Low mortgage rates, affordable home prices, increased buyer confidence and an extremely favorable rent-to-own comparison are driving growth in each of our markets.”
Lennar’s third-quarter revenue rose to $1.1 billion from $820.2 million a year earlier. New orders climbed 44% to 4,198 homes. Contract backlog, an indication of future sales, increased 79% to 4,513 homes. The average sales price of homes delivered jumped to $258,000 from $247,000 a year earlier.
‘Solid’ Quarter
“Lennar turned in a very solid quarter,” Stephen East, an analyst with International Strategy & Investment Group LLC in Saint Charles, Mo., said in a note to clients today. “There should be little doubt this builder is driving its homebuilding operations faster than most of its peers.”
The shares slipped 0.7% to $37.26 this morning. The Standard & Poor’s Supercomposite Homebuilding Index of 11 companies dropped 1.1% as global stocks slumped on concern that an economic slowdown may deepen.
Lennar’s gross margin on home sales, a measure of profitability, rose 2.1 percentage points to 23.2% on higher selling prices and lower incentives to buyers, even as costs for materials and labor increased.
“All around a beat, led by stronger gross margins on falling incentives,” Kenneth Zener, an analyst with Keybanc Capital Markets Inc. in San Francisco, wrote in a note. Lennar “currently outperforms its peers by a wide gross margin.”
KB Home
Other builders have been recording improved results as housing recovers. KB Home, based in Los Angeles, on Sept. 21 reported an unexpected profit for its fiscal third quarter as home sales increased, buoyed by growth in the West Coast. The shares surged 16%, the most since 2008.
The S&P homebuilding index has climbed 87% this year through last week to the highest level since 2007. Lennar gained 91% this year through Sept. 21, while KB Home more than doubled. PulteGroup Inc., the largest U.S. homebuilder by revenue, has jumped 169% to lead gains in the industry.
U.S purchases of new houses rose to a two-year high in August, according to economists surveyed by Bloomberg. The Commerce Department probably will report this week that sales climbed to a 380,000 annual pace from a 372,000 rate in July, based on the median of 60 estimates.
