Lennar beats by $0.36, misses on revs, new orders increased 28%

Lennar reports Q1 (Feb) earnings of $2.57 per share, $0.36 better than the FactSet Consensus of $2.21; revenues rose 12.7% year/year to $7.31 bln vs the $7.39 bln FactSet Consensus.

New orders increased 28% to 18,176 homes; new orders dollar value increased 21% to $7.7 billion.

Backlog of 16,270 homes with a dollar value of $7.4 billion.

Deliveries increased 23% to 16,798 homes, inline with guidance of 16,500-17,000.

Gross margin on home sales of 21.8%.

Q2 Guidance: Sees new orders of 20,900-21,300, deliveries of 19,000-19,500, and gross margin % on home sales of about 22.5%.

Net earnings per diluted share increased 25% to $2.57

Net earnings increased 21% to $719 million

New orders increased 28% to 18,176 homes; new orders dollar value increased 21% to $7.7 billion

Backlog of 16,270 homes with a dollar value of $7.4 billion

Deliveries increased 23% to 16,798 homes

Total revenues increased 13% to $7.3 billion

Homebuilding operating earnings of $1.0 billion

Gross margin on home sales of 21.8%

S,G&A expenses as a % of revenues from home sales of 8.2%

Net margin on home sales of 13.6%

Financial Services operating earnings of $131 million

Multifamily operating loss of $16 million

Lennar Other operating loss of $40 million

Homebuilding cash and cash equivalents of $5.0 billion

Years supply of owned homesites of 1.3 years and controlled homesites of 77%

No outstanding borrowings under the Company's $2.6 billion revolving credit facility

Homebuilding debt to total capital of 9.6%

Repurchased 3.4 million shares of Lennar common stock for $506 million

Increased stock repurchase program up to an additional $5.0 billion

Increased annual dividend from $1.50 per share to $2.00 per share

Stuart Miller, Executive Chairman and Co-Chief Executive Officer of Lennar, said, We are pleased to report another strong quarter as we remained focused on consistent production pace driving sales pace, while using pricing, incentives, marketing spend, and margin informed by dynamic pricing to enable consistent sales volume in a fluctuating interest rate environment. Although affordability continued to be tested by interest rate movements, purchasers remained responsive to increased sales incentives, resulting in a 28% increase in our new orders and a 23% increase in our deliveries year over year.

The macroeconomic environment remained relatively consistent throughout our first quarter, with interest rates fluctuating within a manageable range, employment remaining strong, housing supply remaining chronically short due to production deficits over a decade, and demand strength driven by strong household formation. Housing market fundamentals remained strong as demand continued to outweigh supply. These conditions remained constructive for our overall operating strategy of focusing on production and sales pace over price while growing market share.

Earnings were $719 million, or $2.57 per diluted share, compared to $597 million, or $2.06 per diluted share last year. We delivered 16,798 homes in our first quarter and our new orders were 18,176, up 28%, year over year. Our average sales price, net of incentives, per home delivered was $413,000 in the first quarter, down 8% from last year, and our homebuilding gross margin in the first quarter was 21.8%, up 60 basis points from last year, as a result of our careful management of incentives combined with our intense focus on reducing construction costs, while homebuilding S,G&A expenses were 8.2%, resulting in a 13.6% net margin.

Driven by this quarter's strong operating performance, we constructively allocated capital while we continued to strengthen and fortify our balance sheet. During the quarter, we repurchased $506 million of our common stock, ending the quarter with homebuilding debt to total capital of 9.6%, no borrowings on our $2.6 billion revolver and cash of $5.0 billion. With cash on hand exceeding our debt, and with overall liquidity of $7.6 billion, our balance sheet remains extremely strong. Against that backdrop, we remain focused on our land strategies initiatives in order to intensify our land light focus and assure consistency of execution now and in the future as we embrace an ever-more focused manufacturing model for Lennar.

Jon Jaffe, Co-Chief Executive Officer and President of Lennar, said, Operationally, both our starts pace and sales pace were 4.9 homes per community in the first quarter, as we continue to move closer to an even flow operating model. Our cycle time was down to 154 days, or 30% year over year, as our production first focus has positively impacted our production times, while our inventory turn improved to 1.5 times reflecting broader efficiencies. Concurrently, the Lennar Machine continued to carefully match our sales pace to our production pace using our digital marketing and dynamic pricing models.

During the quarter, we continued the execution of our land light strategy. This was evidenced by our years supply of owned homesites improving to 1.3 years from 1.9 years last year and our controlled homesite percentage increasing to 77% from 68% year over year. These results drove our return on inventory to 30.5%, a sequential improvement of 110 basis points.

Mr. Miller concluded, We continue to remain enthusiastic about our current execution and our future. We have remained focused on our operating strategies, while at the same time being observant of current economic and market trends. This has positioned us particularly well as the economic environment continues to define itself throughout the complicated election year in 2024. As we look ahead to our second quarter, we expect to deliver between 19,000 and 19,500 homes with a gross margin of approximately 22.5%. We remain focused on delivering 80,000 homes for the full year, with a margin that remains consistent with last year's margin. We will continue to fortify our balance sheet with significant liquidity and operate from a position of strength, thus enabling us to continue to execute on our core strategies to drive strong cash flow and higher returns.

LEN Lennar forecasts Q2 deliveries 19,000 to 19,500, est. 18,990

LEN Lennar forecasts Q2 new orders 20,900 to 21,300, est. 20,547