) adjusted earnings of 21 cents per share in the second quarter of
2012 beat the prior-year quarter earnings by 14 cents on the back
of solid new order growth. Earnings also surpassed the Zacks
Consensus Estimate by 5 cents.
Total revenue in the quarter climbed 22% year over year to $930.2
million on the back of pricing and volume gains. Revenue, however,
lagged the Zacks Consensus Estimate of $946 million.
Revenues from the Homebuilding segment was $808.1 million, up 22%
year over year. The increase in segment revenue was due to a 20%
rise in the number of homes delivered excluding unconsolidated
entities and 2% increase in the average sales price. The company
generated $796.5 million from the sales of homes, up 23% year over
year and $11.6 million from the sale of land, down 8.7% year over
The company reported new orders of 4,481 homes in the quarter, up
40% year over year, owing to a recovering market, backed by low
home prices and interest rates.
Gross margin on home sales improved to 22.5% in the quarter, up 310
basis points year over year. The margin growth was triggered
by lower sales incentives to homebuyers (as a percentage of
Financial Services segment revenues was $88.6 million in the second
quarter of 2012, up 49.2% from the year-ago period. The segment
posted operating earnings of $18 million compared with $2.5 million
in the year-ago period, fueled by increased volumes in mortgage and
Rialto Investments revenues slipped 21.4% to $33.5 million in the
second quarter of 2012. Operating earnings were down 56% year over
year to $4.3 million compared with $9.8 million in the same period
last year as the company concentrates on the sale and resolution of
assets to maximize value.
Lennar had cash and cash equivalents of $667.1 million from
homebuilding as of May 31, 2012, compared with $1.02 billion as of
November 30, 2011. Net debt from homebuilding amounted to $2.80
billion as of May 31, 2012, reflecting a net debt-to-capitalization
ratio of 46.9%.
Overall, we are encouraged by the company's impressive first
half results and improved profitability. We believe that the
company is performing better than its peers by increasing sales
prices, reducing incentives, improving volumes and investing in
well positioned high-margin communities. However, despite
management's optimism regarding improving home demand trends, we
believe that the overall housing recovery will be slow.
LENNAR CORP -A (LEN): Free Stock Analysis
TOLL BROTHERS (TOL): Free Stock Analysis Report
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Currently, we have a Neutral recommendation on Lennar Corporation.
The company holds a Zacks #3 Rank (short-term Hold rating). One of
Toll Brothers Inc.
) presently retains a Zacks #1 Rank, which translates into a
short-term Strong Buy rating.
Based in Miami, Florida, Lennar Corporation is engaged in
homebuilding and financial services in the US. Lennar offers multi
level residential buildings, single-family attached and detached
homes, communities and suburban communities, communities with golf
course etc. It operates through three segments, homebuilding,
financial services and Rialto Investments.