Lennar posts wider loss in 3Q, but market improves

By ALAN ZIBEL

posted: 64 DAYS AGO

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-Homebuilder Lennar Corp. reported a wider loss in its fiscal third quarter as it continued to write down the value of land and unsold homes, but executives say the company will be profitable next year assuming the economy remains stable.

Orders for new homes were down 8 percent from a year earlier, but they increased each month during the quarter ending Aug. 31. Another positive sign: the Miami-based company had more sales in the works at the end of last month than any time since August 2008.

"We're gaining confidence that we're getting much closer to the end of this housing-led downturn," Stuart Miller, Lennar's president and CEO, said in a conference call, noting that consumers are feeling much more confident about purchasing a home.

While the housing market and economy are still tentative, Miller said the market "feels materially better than the absolute hopelessness that had existed for so long."

On Friday, the Commerce Department will issue its monthly report on new home sales nationwide. It's expected to show that sales rose 1.6 percent in August, in the fifth consecutive month of increases.

Still, there remain several uncertainties for homebuilders, which are struggling to emerge from the worst downturn since World War II. A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30, and lawmakers have yet to decide whether to extend it. While the Federal Reserve has been able to keep mortgage rates near historic lows, it's unclear how long that will last.

Lennar, which caters to first-time homeowners, sold 2,691 homes, down 29 percent from year-ago levels. The average sales price was $239,000, down 11 percent, but stronger demand allowed Lennar to reduce the incentives it offered homebuyers to $42,200 per home, down from $45,900 a year ago, and markedly better than the $52,600 in offered during the second fiscal quarter.

Company executives said they are still keeping speculative building to a minimum and are instead building homes to match the level of sales.

The company reported Monday that it lost $171.6 million, or 97 cents per share, in the three months ended in August. That includes 76 cents per share in write-downs and tax adjustments, and compares with a loss of $89 million, or 56 cents per share, a year earlier.

Revenue fell 35 percent to $720.7 million from $1.11 billion. Analysts were expecting a loss of 46 cents a share on revenue of $774.4 million.

The results reflect "continued challenging markets but clear improvement from recent quarters," wrote Soleil Equity Research analyst Anna Torma.

Wall Street, however, was in a more negative mood, sending Lennar's shares down 53 cents, or 3.2 percent, to $16.01 in midday trading.

The Miami-based builder raised $99 million through a stock offering in the period and ended the quarter with a cash cushion of $1.34 billion and no outstanding borrowings under its credit facility.

Lennar sells homes in 17 states and was ranked the fourth-largest homebuilder last year by Builder magazine.

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On the Net:

Lennar Corp: http://www.lennar.com/

2009-09-21 13:05:04