Majestic Research

The New York Times

Lennar posts smaller-than-expected loss

By Reuters
Published: March 27, 2008

NEW YORK (Reuters) - Lennar Corp reported a quarterly loss on Thursday as deliveries of new homes and new orders tumbled, but shares of the No. 2 U.S. home builder rose because the results were not as bad as analysts had expected.

The net loss came to $88.2 million, or 56 cents per share, in the first quarter ended on February 29, compared with year-earlier earnings of $68.6 million, or 43 cents per share.

Analysts on average had expected a loss of $1.15 per share, according to Reuters Estimates.

The latest results included a charge of 38 cents per share for valuation adjustments and write-offs.

The U.S. housing market has been in a tailspin for more than two years, hurt by falling prices and evaporating demand.

“Market conditions have remained challenged and continued to deteriorate throughout our first quarter,” Lennar Chief Executive Stuart Miller said in a statement.

“The pace of overall housing inventory growth is exceeding absorption at the current time,” Miller said, adding that market conditions would remain challenging for the near term.

Lennar said first-quarter deliveries fell 60 percent to 3,596 homes. New orders sank 57 percent to 3,045, and the cancellation rate was 26 percent. Revenue dropped 62 percent to $1.1 billion.

Positive news was that Lennar was amassing cash and reported low debt levels, said Majestic Research analyst John Tomlinson, but the substantial decline in orders was cause for worry.

“The lack of demand and the ability to generate new orders in an environment of declining home prices is overall bad news,” Tomlinson said. “These backlogs are getting so low that they’re going to have to generate orders at some point in time.”

Greater incentives of about $48,000 per home helped push down the average sales price by 8 percent to $278,000, Lennar said.

The Miami-based company ended the first quarter with more than $1 billion in cash and had no outstanding balance on its credit facility.

Tomlinson said the sector would remain weak throughout the spring selling season and probably through most of the year, given uncertainties around consumer spending and the U.S. presidential election. Rate cuts by the U.S. Federal Reserve will help, but will take time to work their way through the system.

Lennar shares were up 5.4 percent at $18.54 in trading before the market opened.