Lennar misses earnings target, as home delivery backlog jumps 26%

Homebuilders struggle with supply chain issues despite high demand for houses

Lennar’s Stuart Miller (Getty)
Lennar’s Stuart Miller (Getty)

Lennar’s homebuilding machine missed the mark on its fourth quarter earnings, as supply chain issues led to more backlogs in home deliveries.

The Miami-based company’s backlog grew 26 percent, year-over-year, to 23,771 homes at the end of the fourth quarter. Lennar reported quarterly earnings of $3.91 a share, missing analysts estimates of $4.14 a share.

The company’s stock was down 3 percent to $109.16 at 3 p.m. on Thursday, compared to Wednesday’s closing price.

Lennar executives blamed most of its delays on supply chain issues, calling it a game of “Whac-A-Mole” as to when materials arrive, during a teleconference with analysts on Thursday.

“Short supply is likely to remain for some time to come,” said Stuart Miller, executive chairman of Lennar.

Miller said the company is turning to technology to solve its supply chain issues. Lennar partnered with Austin, Texas-based Icon to build 3-D homes. Miller said he expects to start building the first 3-D community in Austin in 2022.

Like other homebuilders, Lennar said that demand for single-family homes is at a fever pitch, despite growing concerns the market is overheating. The issue instead is building homes fast enough because of the supply chain issues, which lead to delays on deliveries such as cabinets and doors. Lennar, which is known for its precision-like level of building cookie-cutter homes, said it expects these problems to continue into the first quarter of 2022.

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Lennar still reported some roses amid the thorns.

Overall, profit rose to $1.2 billion in the fourth quarter, up 35 percent from $882.8 million in the same period of 2020. Profit margins also increased thanks to land values remaining flat and a reduction in debt costs.

Gross margins on home sales were up, rising to 28 percent in the fourth quarter from 25 percent in the fourth quarter of last year.

Lennar has also focused on selling homes later in the construction process, executives said.

“We have slowed sales to generate higher profits,” said Rick Beckwitt, co-CEO of Lennar.

The average sales price of homes delivered rose to $424,000 in the fourth quarter, compared to $395,000 in the year ended November 30, 2020.

Miller said the company projects strong housing demand for next year. Lennar expects to deliver about 67,000 homes in the fiscal 2022, up from 59,825 homes delivered in 2021.

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