Lennar’s stock jumps on solid Q1 numbers

Home-builder posts better profits than expected by Wall Street

Powerhouse homebuilder Lennar Corp. of Miami beat Wall Street’s expectations Wednesday by reporting better-than-expected first quarter profits and revenues after selling more homes at higher prices and gaining a boost from its purchase of onetime rival CalAtlantic.

The company’s stock price passed the $60 mark on the New York Stock Exchange, recording a 10 percent gain of $5.73 to $62.82.

For investors, housing stocks have been viewed by some analysts as a moribund play as companies such as Lennar, D.R. Horton, KB Home and Toll Brothers have occupied the lower end of their 52-week ranges. That was largely a function of rising raw material, land and labor costs, and a relatively flat home sales picture in February.

Lennar’s stock price has declined by nearly 10 percent since the year began; the Standard & Poor’s 500 index has fallen 2 percent.

But in a statement on Wednesday, Lennar CEO Stuart Miller issued an upbeat forecast for the immediate future, saying “we remain enthusiastic about both our current results as well as our future projections under the Lennar platform.”

He said that in the first quarter of 2018, new home orders and deliveries were 10,910 and 9,994, respectively, “which exceeded the expectations” of both Lennar and CalAtlantic. The acquisition of CalAtlantic was completed on Feb. 12.

“We continue to remain positive on the outlook of the housing industry in general,” Miller said. “Although interest rates have ticked up, unemployment remains low, the labor participation rate has been increasing, and wages have been moving modestly higher, though we think even higher than

the data the government captures.”

Lennar said its fiscal first-quarter net income was $136.2 million, or 53 cents per share. Adjusted for costs related to mergers and acquisitions and pretax expenses, the outcome was $1.11 per share. The average estimate of four analysts surveyed by Zacks Investment Research was for 92 cents per share.

The home-builder posted revenue of $2.98 billion, up from $2.34 billion in the same period last year on quarterly sales of 6,765 homes compared with 5,453 last year. The average sales price rose 7.7 percent to $393,000.

Lennar has projects in 15 metropolitan areas in Florida and operates in 21 states. In the company’s statement, Miller said Lennar intends to focus on a “pure play strategy” where the company concentrates on its home-building business while possibly offloading its Rialto Capital Management arm. He said the company hired Wells Fargo Securities and Deutsche Bank Securities “to advise us regarding strategic alternatives that may be available.” Rialto manages commercial real estate investment funds and finances commercial real estate mortgages.

Additionally, the company announced its multifamily unit raised $500 million last month to help develop apartment projects throughout the nation.

dvlyons@sun-sentinel .com, 954-356-4340, Twitter @davidvlyons