Lennar Corp, United Statesâ€™ second largest homebuilder, reported a profit that beat analystsâ€™ 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 homebuildersâ€™ future revenue, rose 23% in Q3, higher than Q2â€™s 8%, as reported by Reuters.
Lennarâ€™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 yearâ€™s 24.9% to 25.2%.
Bloomberg quotes MKM Partners LLC analyst, Megan McGrath as having said, â€œLennar 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.â€
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 Statesâ€™ 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, â€œThis recovery has been driven by years of production deficit that has limited supply while demand has come back to the market.â€
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To contact the reporter of this story; Yashu Gola at email@example.com