Homebuilder Lennar Corp. LEN released its fiscal second-quarter 2020 results after the market closed on June 15.
Earnings highlights
The homebuilder recorded earnings per share of $1.65 , up 27% from the prior-year quarter. Analysts had anticipated EPS of $1.29. Revenue grew 5% from the year-ago quarter to $5.3 billion, primarily driven by lower average selling prices.
At the end of the quarter, the company had $1.4 billion in cash and cash equivalents.
Reflecting on the company’s performance, CEO Rick Beckwitt commented:
"New home sales strengthened across the country in all of our major markets during the last six weeks. A limited supply of both new and existing homes and an intense focus on construction costs drove our homebuilding gross margin in the second quarter to 21.6%, compared to 20.1% last year. At the same time, our focus on making our homebuilding platform more efficient resulted in an SG&A percentage of 8.3%, an all-time, second quarter low.”
The lower borrowing costs accelerated consumer demand for new homes, especially in the last six weeks of the reported quarter. Executive Chairman Stuart Miller said:
"While unemployment increased throughout the quarter due to impacts from the COVID-19 pandemic, customers moved from rental apartments and from densely populated areas to purchase homes, and home sales grew steadily, as record-low interest rates and low inventory levels drove a favorable rebound in the homebuilding industry.”
Segment performance
In the homebuilding division, revenue tumbled 5% to $4.9 billion for the three months ended May 31. Lennar attributed the decline to lower number of homes delivered coupled with a 4% decline in the average sales price of homes delivered. The average sales price of homes delivered amounted to $389,000, down from $407,000 in the prior year.
The Miami-based company delivered 12,653 homes during the quarter compared to 12,706 in the year-ago quarter. New orders fell 10% to 13,015 homes. The backlog amounted to 17,975 units, which was down 6%. Potential housing revenue from the backlog declined 8% to $7.1 billion.
The Financial Services segment’s operating earnings rose from $62.5 million in the year-ago quarter to $150.6 million on the back of a robust mortgage business.
Lennar Multi-Family reported a $600,000 operating loss, which was an improvement from a $4.3 million operating loss in the year-ago quarter.
Third quarter guidance
While new orders are expected to fall within the range of 12,800 to 13,000 homes in the third quarter, deliveries are projected to be between 13,200 homes and 13,400 homes. Gross margin as a percentage of home sales is anticipated to be around 21.5% to 21.75%, while SG&A expenses as a percentage of home sales is projected to be between 8.3% and 8.5%.
Disclosure: I do not hold any positions in the stocks mentioned.
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