Lennar Corporation’s LEN fourth-quarter fiscal 2015 adjusted earnings of $1.21 per share beat the Zacks Consensus Estimate of $1.12 by 8%. Earnings also surged 13.1% year over year on higher revenues and an improved SG&A ratio.
Total revenue of $2.95 billion missed the Zacks Consensus Estimate of $2.99 billion by 1.3%. Revenues also grew 14.3% year over year driven by impressive performance of the homebuilding, financial services and multi-family segments during the quarter.
Management expects the slow but steady improvement in the housing market to continue into 2016. In fact, the homebuilder believes that the improvement in the housing market is being fueled by improving employment levels, wage increase and improving consumer confidence.
Homebuilding Revenues
Homebuilding revenues increased 15% year over year to $2.68 billion from $2.33 billion in the prior-year quarter. Home sales were $2.6 billion in the quarter, up 16% driven by pricing gains and higher home deliveries.
New home orders increased 10% year over year to 6,053 in the fourth quarter of fiscal 2015. The potential value of net orders increased 20% to $2.1 billion.
Despite a tight labor market, new home deliveries, excluding unconsolidated entities, were up 9.5% to 7,605 driven by an increase in housing demand.
The average selling price of homes delivered was $347,000, up 5.5%.
Backlog grew 14% in the quarter to 6,646 homes. Potential housing revenues from backlog rose 25% to $2.5 billion.
Margins
Gross margin on home sales declined 100 basis points (bps) to 24.6% owing to rising land costs, partially offset by higher average sales price of homes delivered. However, gross margin on home sales improved sequentially to 50 bps.
As a percentage of sales, SG&A expenses increased 40 bps to 9.2% driven by improved operating leverage from higher number of homes delivered. Sequentially, SG&A ratio improved 70 basis points.
Financial Services
Financial Services revenues increased 13.8% to $157.1 million in the quarter. Operating earnings of the segment were $33.8 million, up from $30.2 million a year ago. The increase can be attributed to higher mortgage originations fueled by a strong refinance market, and higher purchase volume.
Rialto Investments
Rialto Investments’ revenues of $61.2 million decreased 30.7% year over year.
Lennar Multi-Family
Lennar Multi-Family revenues increased to $50.1 million in the quarter, significantly higher than $29.4 million reported in the prior-year quarter.
The segment recorded operating earnings of $10.2 million in the fourth quarter, compared to operating loss of $6.1 million in the year-ago quarter.
Fiscal 2015
Lennar Corporation’s fiscal 2015 adjusted earnings of $3.46 per share beat the Zacks Consensus Estimate of $3.36 by 3%. Earnings also surged 23.6% year over year on the back of an increase in revenues.
Total revenue of $9.47 billion beat the Zacks Consensus Estimate of $9.45 billion by 0.2%. Revenues also grew 22% year over year driven by a solid increase in homes delivered.
Lennar currently sports a Zacks Rank #1 (Strong Buy).
Stocks to Consider
Investors interested in the construction sector may also consider Owens Corning OC, Sekisui House Ltd. SKHSY and Masco Corporation MAS. All the three companies carry a Zacks Rank #2 (Buy).
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