Lennar Corp. (LEN) Tops Q1 EPS by $1.49, Revenues Beat

Lennar Corp. (NYSE: LEN) reported Q1 EPS of $3.20, $1.49 better than the analyst estimate of $1.71. Revenue for the quarter came in at $5.33 billion versus the consensus estimate of $5.13 billion.

• Net earnings of $1.0 billion, or $3.20 per diluted share, compared to net earnings of $398.5 million, or $1.27 per diluted share – both up over 150%
  • Excluding the pretax gain of $469.7 million ($358.7 million after tax) related to the mark to market of a strategic investment that went public, EPS would have been $2.04 per diluted share
• Deliveries of 12,314 homes – up 19%
• New orders of 15,570 homes – up 26%; new orders dollar value of $6.5 billion – up 31%
• Backlog of 22,077 homes – up 25%; backlog dollar value of $9.5 billion – up 32%
• Revenues of $5.3 billion – up 18%
• Homebuilding net margins of $824.8 million, compared to $474.3 million
  • Gross margin on home sales of 25.0%, compared to 20.5%
  • S,G&A expenses as a % of revenues from home sales of 8.4%, compared to 9.2%
  • Net margin on home sales of 16.6%, compared to 11.4%
• Financial Services operating earnings of $146.2 million, compared to $58.2 million
• Multifamily operating loss of $0.9 million, compared to operating earnings of $1.8 million
• Lennar Other operating earnings of $471.3 million (including $469.7 million gain related to a strategic investment that went public), compared to $0.9 million
• Homebuilding cash and cash equivalents of $2.4 billion
• No borrowings under the Company's $2.5 billion revolving credit facility
• Homebuilding debt to total capital of 24.0%, compared to 33.6%
• Controlled homesites as a percentage of total owned and controlled homesites increased to 45%, compared to 31%

Stuart Miller, Executive Chairman of Lennar, said, "We are pleased to announce our results for the first quarter of 2021 which were driven by both operational excellence as well as an extraordinary contribution from one of our technology investments."

"We achieved net earnings of just over $1.0 billion, or $3.20 per diluted share, compared to $398.5 million, or $1.27 per diluted share in the prior year. Overall, we continue to see improvement in our bottom line and returns, driven by consistent strategies that have continued to work for our company."

"In spite of a recent uptick in interest rates, the housing market remains very strong across the country. A combination of still low interest rates, strong personal savings rates during the pandemic, strong stimulus from the government, and solid household formation continue to drive demand, while the housing shortage driven by 10 years of production shortfall, defines a constrained supply. This combination indicates a sustained strong housing market with pricing power keeping pace with cost increases."

"Our first quarter results benefited from continued robust market conditions, combined with the exceptional performance of our core homebuilding and financial services businesses. Our first quarter homebuilding gross margin of 25.0%, a 450 basis point improvement over the prior year, was partly driven by our strategy of matching sales pace with production pace and keeping price increases in step with cost increases. Both homebuilding and financial services operations have continued to benefit from our strategic technology investments which have materially driven improvements in both segments. Our homebuilding SG&A was a historic first quarter low of 8.4% vs 9.2% last year and reflects continued improvement as we incorporate technology driven innovation across our platform. In financial services we have continued to drive performance through technology advancements to improve our bottom line."

Mr. Miller continued, "In our first quarter we also saw the upside embedded in some of our technology investments. We are not only improving our core business by incorporating these technologies, but we also benefit from the economic upside of our investments in exceptional innovators. Our well-documented Opendoor investment (NYSE: OPEN) went public in the first quarter and drove $470 million of profit as the public markets joined us in understanding the innovative potential that Opendoor pioneered in the iBuyer space. Although the now public stock price may go up and down over time, we remain long-term investors in order to help evolve our business strategy and drive associated benefits to the Lennar operating platform. In addition, two other technology-driven companies in which we have investments have announced agreements to merge with publicly traded special purpose acquisition companies."

"We ended the quarter with $2.4 billion in cash and no borrowings on our revolver. During the quarter, we began to repurchase a small amount of stock, and ended the quarter with a homebuilding debt to capital of 24.0%, an all-time low."

Rick Beckwitt, Co-Chief Executive Officer and Co-President of Lennar, said, "During the quarter, our homebuilding machine continued to accelerate production, with starts in the quarter up 26% over the prior year, thereby positioning our company for growth through the year. New home sales were strong in all of our major markets and increased 26% year over year. We continued our previously stated strategy of improving our controlled homesite percentage which increased by 1,400 basis points year over year and 600 basis points sequentially to end the first quarter at 45%, while reducing our years owned supply of homesites to 3.4 years from 4.0 years year over year and from 3.5 years sequentially."

Jon Jaffe, Co-Chief Executive Officer and Co-President of Lennar, said, "We have been and continue to be very focused on production costs and cycle times as the homebuilding industry ramps up to meet growing demand. Our focus on our trade partner relationships together with our size and scale have enabled us to maintain consistent production while we match cost increases with pricing power to maintain margin in the first quarter. Lennar is also uniquely positioned with our production-oriented Everything's Included® business model to navigate the industry supply challenges."

Mr. Miller concluded, "The housing market has proven to be resilient in the current environment and we expect it to continue to be a significant driver in the recovery of the overall economy. As we look ahead to our second quarter, we expect to deliver approximately 14,200 - 14,400 homes while we expect homebuilding margins to remain at 25.0% despite rising material and labor costs. With an excellent balance sheet and continued execution of our core operating strategies, we are extremely well positioned for an even stronger 2021 as the year progresses."

For earnings history and earnings-related data on Lennar Corp. (LEN) click here.

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