JUNE 26, 2009, WSJ
By DAWN WOTAPKA
Creative sales strategies helped Lennar Corp. blow through unsold inventory and beat the Street's revenue estimate, but they weren't enough to narrow the quarter's loss. The builder also now has fewer homes to sell going forward.
Still, the Miami-based builder's stock soared Wednesday, jumping $1.37, or over 17%, to $9.19 in 4 p.m. New York Stock Exchange composite trading.
In its fiscal second quarter, Lennar, the nation's fourth-largest builder by annual closings, saw its loss widen on increased write-downs and charges. For the period ended May 31, it posted a loss of $125.2 million, or 76 cents a share, compared with a year-earlier loss of $120.9 million, or 76 cents a share. There were 3.9% more shares outstanding in the more recent period. The latest results included 65 cents in write-downs and tax-valuation allowance charges, compared with 60 cents a year earlier.
Revenue dropped 21% to $891.9 million, though that beat the $597 million analysts surveyed by Thomson Reuters had expected. And while down nearly 20% from a year earlier, deliveries and new orders both skyrocketed from the first quarter: 47% and 63%, respectively.
While not all orders make it to the closing table, the company seemed optimistic. "There are some significant positive influences out there that are beginning to shape a more positive future," Stuart Miller, president and chief executive, said in an earnings call.
The builder said liquidity was aided by shaving completed, unsold inventory by 53% to 626 homes from 1,321 homes at Feb. 28. The industry's average is 1,365 homes, with 817 of them finished, according to JPMorgan.
Known as speculative inventory, unsold homes have dogged builders during the downturn because they typically require extensive, profit-eroding specials -- such as free upgrades or tropical vacations -- to catch buyers' eyes. Lennar has shown itself as one of the more creative marketers: Its specials have included no-money-down and a 3.625% mortgage rate -- one of the industry's lowest for the loan's life, instead of a "teaser" for an introductory period before it resets higher.
Such specials appear to have been effective, given that builders face tough competition from foreclosures which can sell for bargain prices, and have so far been the stars of the spring selling season. The cancellation rate came in at an impressive 15%, down from 22% in 2008's second quarter.
By DAWN WOTAPKA
Creative sales strategies helped Lennar Corp. blow through unsold inventory and beat the Street's revenue estimate, but they weren't enough to narrow the quarter's loss. The builder also now has fewer homes to sell going forward.
Still, the Miami-based builder's stock soared Wednesday, jumping $1.37, or over 17%, to $9.19 in 4 p.m. New York Stock Exchange composite trading.
In its fiscal second quarter, Lennar, the nation's fourth-largest builder by annual closings, saw its loss widen on increased write-downs and charges. For the period ended May 31, it posted a loss of $125.2 million, or 76 cents a share, compared with a year-earlier loss of $120.9 million, or 76 cents a share. There were 3.9% more shares outstanding in the more recent period. The latest results included 65 cents in write-downs and tax-valuation allowance charges, compared with 60 cents a year earlier.
Revenue dropped 21% to $891.9 million, though that beat the $597 million analysts surveyed by Thomson Reuters had expected. And while down nearly 20% from a year earlier, deliveries and new orders both skyrocketed from the first quarter: 47% and 63%, respectively.
While not all orders make it to the closing table, the company seemed optimistic. "There are some significant positive influences out there that are beginning to shape a more positive future," Stuart Miller, president and chief executive, said in an earnings call.
The builder said liquidity was aided by shaving completed, unsold inventory by 53% to 626 homes from 1,321 homes at Feb. 28. The industry's average is 1,365 homes, with 817 of them finished, according to JPMorgan.
Known as speculative inventory, unsold homes have dogged builders during the downturn because they typically require extensive, profit-eroding specials -- such as free upgrades or tropical vacations -- to catch buyers' eyes. Lennar has shown itself as one of the more creative marketers: Its specials have included no-money-down and a 3.625% mortgage rate -- one of the industry's lowest for the loan's life, instead of a "teaser" for an introductory period before it resets higher.
Such specials appear to have been effective, given that builders face tough competition from foreclosures which can sell for bargain prices, and have so far been the stars of the spring selling season. The cancellation rate came in at an impressive 15%, down from 22% in 2008's second quarter.
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