Lennar Q2 Earnings: ‘Purchasers Remained Responsive To Increased Sales Incentives’

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Lennar Corp (NYSE: LEN) is trading down in extended hours on Wednesday even though it reported better-than-expected financial results for its second quarter.


Lennar’s guidance for the third quarter

Investors are concerned because the guidance failed to impress. LEN now expects to deliver up to 21,000 homes in the second quarter.

New orders, it added, will fall between 20,500 and 21,000 in Q2. Stuart Miller – the co-chief executive of Lennar Corp said in a press release today:

 

Although affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment, purchasers remained responsive to increased sales incentives.

The homebuilder expects average sales price to be around $422,500 in the second quarter helping gross margin on home sales to come in at 23%. Lennar stock is down roughly 10% versus its year-to-date high at writing.


Lennar’s Q2 earnings snapshot

Earned $954 million versus the year-ago $872 million
Per-share earnings also improved from $3.01 to $3.45
Total revenue jumped 10% year-over-year to $8.8 billion
Consensus was $3.23 a share on $8.55 billion in revenue

Lennar received 21,293 new orders for homes – up 19% and ended its second quarter with a backlog of 17,873 homes, as per the earnings report. Co-CEO Miller also said on Wednesday:

The macroeconomic environment remained relatively consistent with employment remaining strong, housing supply remaining chronically short due to production deficits over a decade, and demand strength driven by strong household formation.


What else was noteworthy in LEN Q2 report

In April, Lennar Corp announced 50 cents a share quarterly cash dividend. The homebuilder spent just over $600 million on share buybacks in its fiscal Q2.

The $43 billion giant based out of Miami, Florida delivered a total of 19,690 homes in its recently concluded quarter – up 15% on a year-over-year basis. According to co-chief executive Stuart Miller:

We remained focused on consistent production pace driving sales pace, while using pricing, incentives, marketing spend and margin adjustment to enable consistent sales volume in a fluctuating interest rate environment.

Last week, Brave Warrior Advisors said it cut its stake in Lennar stock by a whopping 43.6% in the fourth quarter. The fund still owns more than half-a-million shares of the construction company at writing.


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