Homebuilder Lennar misses estimates as bad weather hits deliveries

  • Lennar missed Wall Street estimates for the first quarter, hurt by bad weather.
  • The No. 2 U.S. homebuilder remained upbeat, however, as home prices moderated in the wake of easing mortgage rates.
  • U.S. homebuilding fell more than expected in February as construction of single-family homes dropped to a near two-year low.

Lennar missed Wall Street estimates for the first quarter, hurt by bad weather, but the No. 2 U.S. homebuilder remained upbeat as home prices moderated in the wake of easing mortgage rates. Shares of the company, which earlier fell 1 percent on Wednesday, now up 3.1 percent at $51.25 before the bell.

"We continued to see choppiness in the marketplace during our first quarter," Lennar Executive Chairman Stuart Miller said as the company missed quarterly profit and revenue estimates.

Miller added that mortgage interest rates have now subsided and home prices have moderated.

Last week the U.S. Federal Reserve said there would be no more interest rate hikes this year amid a slowing U.S. economy.

The moderation in mortgage rates and house prices is likely to improve affordability, especially for first-time homebuyers who have been largely priced out of the market. But homebuilders remain constrained in their ability to construct more homes for the lower end of the market.

U.S. homebuilding fell more than expected in February as construction of single-family homes dropped to a near two-year low.

In its latest reported quarter, Lennar delivered only 8,820 homes below its forecast of 9,000 to 9,500 units.

BTIG analyst Carl Reichardt said in a pre-earnings note that he expected many public builders especially those in California to cite poor weather as hurting or delaying business in the first quarter.

"While traffic and order rates can be made up if weather returns to normal in March, the most meaningful difficulties are likely to be seen in timely closings."

Orders rose 23.7 percent to 10,463 homes in the quarter ended Feb.28, beating estimates of 10,385 units.

Miller reiterated optimism in the spring selling season and forecast continued improvement in the demand for new homes.

The company said it remained on target to meet its 2019 synergy goals.

Lennar posted gross margins on home sales of 20.1 percent, up from 19.5 percent a year ago.

Net income jumped 76.1 percent to $239.9 million, or 74 cents per share, in the quarter and total revenue rose 29.7 percent to $3.87 billion.

Analysts on average had expected revenue of $4.11 billion and earnings per share of 75 cents, according to Refinitiv data.

Lennar shares have fallen 16 percent in the past 12 months compared with a 10 percent fall in the broader PHLX Housing Index.