Lennar Corp. saw its stock drop on Tuesday after it released second quarter earnings and said that tariffs on Chinese goods are costing the company an average of about $500 per home.
Still, the Miami-based homebuilder’s quarterly earnings beat analysts’ expectations. The company’s profit, revenue and home deliveries rose thanks to lower mortgage rates and strong incentives offered to homebuyers. Lennar reported second quarter net income rose to $421.5 million, or $1.30 per share, up 36 percent from $310.3 million, or 94 cents per share, for the same period of 2018.
New home deliveries increased to 12,706 homes in the second quarter, up 5 percent compared to the second quarter of last year. Revenue from Lennar’s homebuilding division rose 4 percent to $5.2 billion, above analysts’ expectations of $5.11 billion.
But the company’s stock — along with other homebuilders such as Toll Brothers — began to fall as Lennar announced the effect of tariffs as well as a weaker outlook for the third quarter during a conference call with analysts. Lennar projects its third quarter earnings per share to be $1.25 to $1.34. Analysts had expected Lennar’s earnings in the third quarter to be $1.54.
Yet, Lennar’s boost in deliveries shows that demand for low-priced single-family homes continues to remain strong, despite a number of indicators showing that the housing market is slowing down.
On Tuesday morning, the U.S Census Bureau reported that sales of newly built homes fell 7.8 percent month-to-month.
In the conference call, Lennar’s Executive Chairman Stuart Miller said that he would categorize the housing market as “solid” rather than “robust.” Miller stressed that the company is having strong traffic for its homes.
An analyst questioned why the company was still using incentives if the housing market had improved. Miller said that Lennar is reacting to the market conditions and that it was following what other home builders were offering.
The company’s stock traded at $48.64 as of 1:35 p.m., down 5.3 percent.