Lennar Reports Good 1st-Quarter Numbers

Homebuilder posts earnings, revenue beat

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Mayank Marwah
Mar 17, 2021
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Homebuilder Lennar Corp. (

LEN, Financial) released its fiscal first-quarter 2021 results after the market closed on March 16. Both earnings and revenue surpassed Wall Street's expectations.

Earnings highlights

The homebuilder recorded earnings of $2.04 per share, up 61% from the prior-year quarter. Analysts had anticipated earnings of $1.65. Revenue grew 18% from the year-ago quarter to $5.3 billion. Analysts were anticipating revenue of $5.08 billion.

Executive Chairman Stuart Miller commented on the company's performance:

"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."

At the end of the quarter, the company had $2.4 billion in cash and cash equivalents. Homebuilding debt was $5.98 billion.

Segment performance

In the homebuilding division, revenue rose 18% to $4.9 billion for the three months ended Feb. 28. Lennar attributed the growth to a higher number of homes delivered. The average sales price of homes delivered amounted to $398,000. That compares with $402,000 a year ago.

The Miami-based company delivered 12,302 homes during the quarter (barring unconsolidated entities) compared to 10,313 in the year-ago quarter. New orders increased 26% to 15,570 homes for a total appreciation in value of 31% to $6.5 billion. The backlog amounted to 22,077 units, which was up 25%. Potential housing revenue from the backlog surged 32% to $9.5 billion.

The housing gross profit margin jumped to 25% in the first quarter, highlighting efforts to reduce construction expenses. In addition, improved operating leverage courtesy of higher housing revenue helped.

The financial services segment recorded a 22.9% growth in revenue to $244.1 million. Likewise, operating earnings rose from $58.2 million in year-ago quarter to $146.2 million on the back of a robust mortgage business.

Lennar Multi-Family reported $6.9 million in sales, which grew a mammoth 263% on a year-over-year basis. The segment's operating earnings totaled $471.3 million, which was an improvement from a $0.9 million operating profit in the year-ago quarter.

Looking forward

The lower borrowing costs and scintillating demand for new homes helped Lennar's overall performance for the latest quarter. In addition, a robust stimulus package coupled with continued undersupply of new and existing inventory aided the company's results.

"In spite of a recent uptick in interest rates, the housing market remains very strong across the country," Miller said. "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."

While new orders are expected to fall within the range of 16,500 to 16,700 homes in the second quarter of 2021, deliveries are projected to be between 14,200 homes and 14,400 homes. Gross margin as a percentage of home sales is anticipated to be 25%%, while selling, general and administrative expenses as a percentage of home sales is projected to be between 7.9% and 8%.

For fiscal 2021, the company anticipates deliveries to be around 62,000 to 64,000 homes. The average sale price is estimated to be around $400,000. While the gross margin is predicted to be 25%, selling, general and administrative expenses as a percentage of home sales is expected to be between 7.6% and 7.8%.

Disclosure: I do not hold any positions in the stocks mentioned.

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