Lennar Profit Beats Expectations Amid Increase in Sales and Prices

Lennar Corp, United States’ second largest homebuilder, reported a profit that beat analysts’ expectation of 47% increase as it increased home sales at higher prices. In premarket trading, its shares gained by 6%.

The company said that orders, which are a key indicator of homebuilders’ future revenue, rose 23% in Q3, higher than Q2’s 8%, as reported by Reuters.

Lennar’s results might signal a pick in demand after the mild selling season in spring, which made D.R. Horton Inc, the largest homebuilder, to offer discounts in a bid to boost sales in the quarter that ended June 30.

On Wednesday, Lennar announced a 15% increase in average selling price to $332,000 in the quarter that ended August 31. The gross margins on home sales improved from last year’s 24.9% to 25.2%.

Bloomberg quotes MKM Partners LLC analyst, Megan McGrath as having said, “Lennar appears to have pulled off in its fiscal third quarter what others have not yet been able to this summer: strong order, growing average selling prices, and strong gross margins.”

Net income for the three months to August was 78 cents per share or $177.8 million in comparison to 54 cents per share or $120.7 million last year, according to a statement released by the company today.

The company has managed to increase prices despite the poor recovery of the United States’ housing market since it caters to buyers that want second homes, and are comfortable with high rates of interest.

In addition, Lennar accumulated land with low-cost purchases in the economic downturn of 2008-2010, giving it an advantage over competitors like Pulte Group and D.R. Horton despite the slowdown.

Stuart Miller, CEO of Lennar said, “This recovery has been driven by years of production deficit that has limited supply while demand has come back to the market.”

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To contact the reporter of this story; Yashu Gola at yashu@forexminute.com

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