U.S home builder, Lennar Corporation (NYSE:LEN), performed better than expectations in its fiscal third quarter on higher house demands. Stable jobs growth and low mortgage rates underscore the company’s stable performance. Afterwards shares of the company shot up in the exchange.
Stuart Miller, Lennar’s Chief Executive, said that the market is regaining momentum at a steady pace resonating with the FED’s reports published last week. The orders, an important aspect for companies with respect to future revenue, bolstered year over year to 10 percent, a 16% increase in deliveries of completed homes and a 5% increase in average price, to $350,000.
“We have believed and continue to believe that the downside in the housing market is very limited and the upside very significant,” Mr. Miller said Monday in a conference call with investors to discuss Lennar’s results.
New single-family home constructions in the U.S in the first eight months of the 2015 are up 11% from the same period last year.
First-time buyers hiked year over year 25% to 30% in the third quarter, according to Mr. Miller. That report merge with the National Association of Realtors publication on Monday which states an increase of 32 percent in existing homes sales by first-time buyers in August, up from 29% a prior-year period.
Lennar is also optimistic about the growth of its rental-apartment business; it has 28 projects totaling 7,700 units under development with partners. “There is very, very large pent-up demand both in rental and in for-sale (housing) for buyers who need to come back in,” Mr. Miller said.
Lennar posted a profit of $223 million, or 96 cents a share, compared to $177.8 million, or 78 cents a share, a year earlier, beating analysts’ estimates of 80 cents in per-share profit and $2.42 billion in revenue, polled by Thomson Reuters.
Despite gains in revenue margins, the firm’s gross margins dropped to 24.1% from 25.2% a year earlier. The lower gains in gross margins were attributed by higher land costs, which surged 56% from last year’s quarter.
Earlier this year Lennar also started building communities of rental single-family homes, a project of 80 homes near Reno, Nev. Lennar now “expects to expand on that platform” due to the “very successful” early results from the Reno project, Mr. Miller said. He didn’t provide additional details on the call.
