Lennar Corp. (LEN, Financial) released its first-quarter 2019 results before the opening bell on March 27. Both earnings and revenue missed Zacks consensus estimates as the housing market slowed during the quarter despite a decrease in mortgage rates.
Prospects for the future, however, are bright for the U.S.'s second-largest homebuilder as it sees the housing market stabilizing in the near term. In addition, mortgage rates are declining and home prices have started to moderate.
Key metrics
The company’s net income amounted to $239.9 million, or 74 cents per share, up from $136.2 million, or 53 cents per share, reported in the year-ago quarter. Revenue stood at $3.87 billion, reflecting a 29.8% year-over-year decline.
The gross margin for home sales was 20.1% as a result of an increase in the average price of homes delivered, which was partially offset by mounting construction costs. Selling, general and administrative expenses accounted for 9.5% of sales.
At the end of the quarter, the company’s balance of cash and cash equivalents amounted to $852.6 million. The net homebuilding debt was $8.4 billion.
Segment performance
In the homebuilding division, the company witnessed a 36.1% increase in sales to $3.62 billion thanks to a higher number of homes delivered coupled with rising average selling prices. Home sales made up $3.61 billion of total revenue, while land sales came in at $13.8 million.
Deliveries climbed 30% to 8,820 homes. New orders rose 24% to 10,463 homes. The backlog declined 2% to 17,259 homes.
In a statment, Executive Chairman Stuart Miller said:
“Our new order growth exceeded the high end of our guidance by 5%, while our deliveries fell short of guidance primarily due to well-documented weather issues across the country. Even with lower than expected revenues in the first quarter, our continued focus on homebuilding operating efficiencies allowed the Company to increase operating earnings at a higher rate than revenues.”
Financial services revenue came in at $143.3 million, up 26.9% from the year-ago quarter. The segment’s operating income declined 15% to $21.8 million. This was attributable to the sale of non-core businesses in first-quarter 2019 as well as a decline in the Rialto Mortgage Finance securitization revenues.
Lennar Multi-Family revenue stood at $97.4 million. Operating earnings for the segment were $6.8 million, up from a loss of $1.2 million in the year-ago quarter.
Disclosure: I do not hold any positions in the stocks mentioned.
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