Lennar Posts Loss But Beats Estimates
Lennar reported a quarterly loss Thursday as deliveries of new homes and new orders tumbled, but the results were not as bad as expected and shares of the No. 2 U.S. home builder rose.
Chief Executive Stuart Miller said the U.S. economy was deteriorating rapidly and had slipped into recession.
The net loss came to $88.2 million, or 56 cents per share, in the fiscal first quarter ended Feb. 29, compared with a profit of $68.6 million, or 43 cents per share, a year earlier.
Analysts on average had expected a loss of $1.15 per share, according to Reuters Estimates.
The latest results included a charge of 38 cents per share for valuation adjustments and write-offs.
The U.S. housing market has been in a tailspin for more than two years, hurt by falling prices and evaporating demand.
"The housing market has remained challenged throughout the first quarter of 2008, but what's also beginning to come clear is that the rest of the economy has now followed suit and I believe has now slipped into recession," Miller said on a conference call.
"The deterioration that took place so quickly in the housing market last year now seems to be happening at the same rapid pace in the overall economy."
Lennar said first-quarter deliveries fell 60 percent to 3,596 homes. New orders sank 57 percent to 3,045, but the cancellation rate improved to 26 percent from 33 percent in the previous quarter. Revenue dropped 62 percent to $1.1 billion.
Majestic Research analyst John Tomlinson said positive news was that Lennar was amassing cash and reported low debt levels, but he said the substantial decline in orders was cause for worry.
"The lack of demand and the ability to generate new orders in an environment of declining home prices is overall bad news," Tomlinson said. "These backlogs are getting so low that they're going to have to generate orders at some point in time."
Greater incentives of about $48,000 per home helped push down the average sales price by 8 percent to $278,000, Lennar said.
The Miami-based company ended the first quarter with more than $1 billion in cash and had no outstanding balance on its credit facility.
Tomlinson said the housing sector would remain weak throughout the spring selling season and probably through most of the year, given uncertainties about consumer spending and the presidential election. Rate cuts by the Federal Reserve will help but will take time to work their way through the system.
Lennar shares were up 71 cents, or 4 percent, to $18.30 in morning trading on the New York Stock Exchange.