Lennar Corp. (LEN) Tops Q3 EPS by 6c
Lennar Corp. (NYSE: LEN) reported Q3 EPS of $1.06, $0.06 better than the analyst estimate of $1.00. Revenue for the quarter came in at $3.26 billion versus the consensus estimate of $3.26 billion.
- Net earnings of $249.2 million, or $1.06 per diluted share, compared to net earnings of $235.8 million, or $1.01 per diluted share
- Deliveries of 7,598 homes – up 12%
- New orders of 7,610 homes – up 8%; new orders dollar value of $2.9 billion – up 14%
- Backlog of 10,212 homes – up 10%; backlog dollar value of $4.1 billion – up 18%
- Revenues of $3.3 billion – up 15%
- Lennar Homebuilding operating earnings of $386.3 million, compared to $344.9 million – up 12%
- Gross margin on home sales of 22.8% – improved 20 basis points
- S,G&A expenses as a % of revenues from home sales of 9.2% – improved 10 basis points
- Operating margin on home sales of 13.6% – improved 40 basis points
- Lennar Financial Services operating earnings of $49.1 million, compared to $53.2 million
- Rialto operating earnings (net of noncontrolling interests) of $3.2 million, compared to $5.9 million
- Lennar Multifamily operating earnings of $9.1 million, compared to $2.6 million
- Lennar Homebuilding cash and cash equivalents of $565 million
- Lennar redeemed the $250 million principal amount of 6.875% senior notes due 2021 that had been issued by WCI Communities, Inc.
- Lennar Homebuilding debt to total capital, net of cash and cash equivalents, of 39.6%
Stuart Miller, Chief Executive Officer of Lennar Corporation, said, "We are pleased to announce our third quarter results as we achieved net earnings of $249.2 million, or $1.06 per diluted share. These results were supported by strong demand for homes, low unemployment, favorable interest rates and increased consumer confidence which are all signs of a very healthy homebuilding market."
Mr. Miller continued, "Our core homebuilding business continued to produce strong operating results in the third quarter as our home deliveries and new orders increased 12% and 8%, respectively, compared to last year, while our gross and operating margins were 22.8% and 13.6%, respectively. Our sales incentives per home delivery in the third quarter were 5.5%, our lowest percentage since 2006. We continued to invest in new technologies throughout various aspects of our business, which helped contribute to a record low third quarter S,G&A % of home sales revenues of 9.2%."
"We continue to remain focused on fortifying our financial position. In February 2017, we acquired WCI for $643 million in an all-cash transaction. Our strategy at that time was to integrate WCI operations and systems efficiently, and to quickly return our cash position and leverage back to prior year levels. In very short order, we have seamlessly completed the integration of WCI, and we have improved our net homebuilding debt to total capital to 39.6%, a decrease of 30 basis points from the prior year. The improvement in our leverage coupled with a strong cash position and improved financial flexibility and capacity from our $1.6 billion revolving credit facility positions our balance sheet extremely well for the future."
"A few weeks ago, we provided an update on our third and fourth quarter home deliveries and new orders from the impact of Hurricanes Harvey and Irma. After having time to complete a more detailed assessment, we can confirm that the overall damage to our communities was minimal. Additionally, given the disruption from the preparation for the storms, clean-up after the storms, and restart and normalization of business operations, we maintain our estimate that approximately 950 closings will be pushed from 2017 into 2018. We expect that once we get past the short-term impact from the storms, there will be increased economic activity and an increased demand for new homes which will result in a broader range of opportunities for us as we look towards 2018."
"Complementing our homebuilding business, our Financial Services business reported earnings of $49.1 million in our third quarter. Although these results are down 8% from the prior year, the decrease was primarily due to a significantly lower number of refinance transactions which was partially offset by higher profit per transaction in our title operations."
"Additionally complementing our core homebuilding performance, our ancillary business segments continued to perform as expected and to mature as independent businesses."
Mr. Miller concluded, "We continue to execute our carefully-crafted strategy across all of our businesses. While our homebuilding and financial services businesses continue to be the primary drivers of our quarterly earnings, we are in an excellent position across our multiple platforms."
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