Lennar Corporation, Miami (NYSE: LEN and LEN.B) late Monday reported net earnings of $213.6 million, or $0.91 per diluted share, for its second quarter ended May 31, 2017. The gain compared to second quarter net earnings attributable to Lennar in 2016 of $218.5 million, or $0.95 per diluted share. Analysts were expecting a profit of $0.79 per share. Shares of Lennar were up 3.9% at $54.80 in early trading Tuesday before rising to $55,75 and then settling back to $53.50 by mid-afternoon.
Revenues were up 19% to $3.3 billion as deliveries rose 15% to 7,710 homes. The average sales price of homes delivered rose 3% to $374,000 in the second quarter of 2017, compared to $362,000 in the second quarter of 2016. Sales incentives offered to home buyers were $22,700 per home delivered in the second quarter of 2017, or 5.7% as a percentage of home sales revenue, compared to $21,800 per home delivered in the second quarter of 2016, or 5.7% as a percentage of home sales revenue, and $22,700 per home delivered in the first quarter of 2017, or 5.9% as a percentage of home sales revenue.
New orders were up 12% to 8,898 homes with a dollar value to $3.4 billion, up 17%. Backlog at quarter’s end was 10,201 homes – up 13%; backlog dollar value was $4.0 billion – up 20%.
Gross margin on home sales of 21.5%, compared to 23.1%, improved sequentially 40 basis points from Q1 2017
SG&A expenses as a percentage of revenues from home sales of 9.3%, consistent with Q2 2016, improved sequentially 100 basis points from Q1 2017.
Among operating segments, Lennar Financial Services reported operating earnings of $43.7 million, compared to $44.1 million in the prior-year quarter. The Rialto unit posted operating earnings (net of noncontrolling interests) of $6.2 million, compared to an operating loss (net of noncontrolling interests) of $13.8 million. Lennar Multifamily had operating earnings of $6.5 million, compared to $14.9 million in the 2016 quater.
Lennar ended the quarter with home building cash and cash equivalents of $748 million. During the quarter, the company issued $650 million of 4.50% senior notes due 2024 and retired its 12.25% senior notes due 2017 and increased its credit facility to $2.0 billion.
Lennar’s debt to total capital, net of cash and cash equivalents, was 40.7%.
Stuart Miller, Lennar CEO, said, “These strong results were supported by an improved macroeconomic environment, renewed optimism, wage and job growth, and increased consumer confidence. We are now seeing, contrary to recent reports on housing starts and building permits, more of a reversion to normal in the housing market than the slow and steady recovery pace of the last several years.
Miller continued, “The overall market improvement was supported by our highest quarterly new orders in the last ten years of 8,898 homes, a 12% increase year over year. Home deliveries and revenues from home sales increased 15% and 18%, respectively, year over year, while our backlog dollar value increased 20% to $4.0 billion.
“Our core homebuilding business continued to produce solid operating results in the second quarter as our gross margin and operating margin on home sales were 21.5% and 12.1%, respectively. Even with 20 basis points of WCI transaction-related expenses, our SG&A as a percentage of revenues from home sales of 9.3% matched the lowest second quarter SG&A percentage in our history, primarily due to improved operating leverage and our continued focus on investing in new technologies.
He added, “Finally, FivePoint completed its initial public offering in May 2017, of which we now own approximately 40%. As a now public company with quarterly filings, Lennar shareholders will have greater transparency into FivePoint, which will provide an even better understanding of our strategic investment.
