) reported adjusted earnings of 56 cents per diluted share in the
fourth quarter of fiscal 2012, beating the comparable prior-year
earnings by 250%. The earnings beat was driven by double-digit
growth in homebuilding revenues and solid operating margins.
Earnings also surpassed the Zacks Consensus Estimate of 44 cents
Total revenue in the quarter grew 42% year over year to $1.35
billion, lagged the Zacks Consensus Estimate of $1.30 billion by
3.8%. Lennar benefited from both pricing and volume growth, with
the housing market showing signs of stability.
Homebuilding revenues grew 43.0% y/y to $1.2 billion. Home
sales were $1.2 billion in the quarter, up 41% year over year.
The increase in home sales was driven by a 7.0% hike in average
sales price of homes delivered and 32% rise in the number of new
homes delivered. The company delivered 4,426 homes in the
quarter. Land sales amounted to $40.7 million, up 130% year over
New home orders increased 32% to 3,983 homes in the fourth
quarter of 2012 as a stable market, backed by low home prices and
low interest rates, increased the demand for home buying. As
renting became expensive, buying a home turned out to be a more
The company's backlog totaled 4,053 homes as of November 30,
2012, up 87% from 2,171 homes as of November 30, 2011. Potential
housing revenues from backlog rose a huge 107% to $1.2 billion
from $560.7 million last year.
Gross margin on home sales expanded 410 basis points to 23.5%
on the back of a rise in average sales price, increased
deliveries from new higher-margin communities and reduced
incentives. Operating margin on home sales improved 660 basis
points to 12.2%, driven by price increases and higher
Financial Services segment revenues climbed 68% to $121.0
million in the quarter. The operating earnings of Lennar
Financial Services were $33.2 million in the fourth quarter of
2012 compared with $9.1 million in the prior year quarter.
The improvement in profit was driven by higher volumes in the
segment's mortgage and title operations and margin improvement in
the mortgage operations. Volume and margin expansion were driven
by higher number of homes delivered and refinance
Rialto Investments revenues slipped 22.6% to $36.0 million in
the quarter. Rialto Investments' operating earnings of $4.6
million (including earnings from non-controlling interests) in
the fourth quarter of 2012, declined from operating earnings of
$8.0 million (including non-controlling interests) in the prior
A peer of
Meritage Homes Corporation
), Lennar reported adjusted earnings of $3.11 per share
(including partial reversal of the deferred tax asset valuation
allowance) for fiscal 2012, beating the comparable prior-year
earnings by a wide margin of $2.63.
The earnings beat was driven by double-digit growth in
homebuilding revenues and solid operating margins. Earnings
surpassed the Zacks Consensus Estimate of $2.99 by 4.0%.
Total revenue in the quarter grew 33% year over year to $4.10
billion, lagged the Zacks Consensus Estimate of $4.06 billion by
1%. Lennar benefited from 37% increase in new orders and 27%
increase in number of homes delivered.
The company expects to continue to achieve further
profitability in fiscal 2013 on the back of strong liquidity
position, land acquisitions and new community openings.
Lennar carries Zacks Rank #3 (Hold). However, we believe the
stock will jump to Zacks Rank #1 or #2 after announcing solid
We appreciate that Lennar is gaining momentum with steadily
improving housing conditions, rising home prices, declining
inventories and improving consumer confidence. Lennar has
witnessed solid year-over-year growth in new home orders, average
selling prices and home closings in all the quarters of 2012.
Margins have also been above average despite rising costs,
driven by strong operating leverage. Lennar appears confident of
significant growth in the rest of the fiscal year and even
We believe that the company is performing better than its
peers by increasing sales prices, reducing incentives, improving
volumes and by making opportunistic land acquisitions. Moreover,
Lennar's focus on the quality of communities instead of quantity
also benefits its margins and new sales orders.
LENNAR CORP -A (LEN): Free Stock Analysis
MERITAGE HOMES (MTH): Free Stock Analysis
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