Lennar reports Q1 earnings down 9 percent

Company said its pace of new homes sales has quickened post-election

Mar.March 21, 2017 01:30 PM

Construction workers at a Lennar home in Doral. (Credit: Getty Images)

Miami-based homebuilder Lennar Corp. on Tuesday reported a 9 percent drop in first quarter earnings, but expressed optimism, saying the pace of home sales has picked up post-election.

Lennar reported net earnings of $130.8 million or 56 cents a share for the quarter ended Feb. 28, compared to $144.1 million or 63 cents a share for the same period of last year. The most recent quarter’s earnings included a net loss related to WCI Communities of $8.4 million or 3 cents a share, primarily due to one-time transaction expenses. 

Lennar CEO Stuart Miller said the country’s economic environment has improved since the election, and the company’s homebuilding operations “have gone from slow and steady to a faster than expected sales pace” throughout the first quarter. “In this environment of accelerating sales pace, together with limited land and labor, and tight inventory particularly at the lower price points, we believe we are positioned for increased pricing power and solid earnings,” Miller said in a statement.

Lennar acquired WCI in February, which gave the company “well-located, established communities” that partially offset its need to purchase raw land in its Florida markets, he said.

During the first quarter, home deliveries and new orders increased by 13 percent and and 12 percent, respectively, compared to last year, the company reported. Its backlog dollar value increased 24 percent from last year to $3.5 billion.

Among its divisions, Lennar’s financial services business reported $20.7 million of earnings in the first quarter, compared to $14.9 million last year, primarily due to increased volume and profitability in the segment’s title operations, the company said. Its multifamily business generated $19.2 million of earnings in the first quarter, compared to $12.2 million last year, primarily due to the sale of two apartment communities by its joint ventures. And its Rialto business reported $12 million of earnings in the first quarter of 2017, compared to $1.9 million last year, related primarily to strong margins from its commercial lending businesses, Lennar said.

In January, Fitch Ratings assigned a ‘BB+/RR4’ rating to Lennar’s proposed offering of $350 million in senior unsecured notes, which the company expected to use to help fund its acquisition of WCI Communities and to possibly repay debt. The notes, due 2022, were given a rating outlook of “positive.” The ratings are in line with Lennar‘s existing debt.

Lennar has been actively buying land in Miami-Dade County. In December, a Lennar affiliate paid $51 million for more than 100 acres near the site of the planned American Dream Miami mega-mall. The same affiliate paid $41 million in January 2016 for 130 acres immediately south of that site, as well as a 143-acre site in Miami Lakes. — Ina Cordle

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