Lennar 3Q profit drops 31 pct, meets Street view

MIAMI — Lennar Corp.’s fiscal third-quarter profit dropped 31 percent as the company delivered fewer homes.

The Miami-based homebuilder said Monday that demand is picking up somewhat, driven by low home prices and all-time low interest rates. Still, the company conceded that the uptick in demand is being squeezed by tightening lending standards, high unemployment and weak consumer confidence.

Homebuilders are a bellwether for the housing market and the economy. While new homes represent less than one-fifth of the total housing market, construction of houses has a major impact on the economy. Each new home creates an average of three jobs and generates $90,000 in taxes, according to the National Association of Home Builders.

Lennar shares rose 40 cents, or 2.9 percent, to $14.20 in premarket trading.

Lennar reported net income of $20.7 million, or 11 cents a share, for the three months ended Aug. 31, down from $30 million, or 16 cents a share, a year ago.

The reduced earnings figure matched the expectations of analysts polled by FactSet.

Revenue dipped 1 percent to $820.2 million from $825 million, but beat Wall Street’s estimate of $794.4 million.

Home deliveries fell 3 percent to 2,865 homes, while new orders rose 11 percent to 2,914 homes. CEO Stuart Miller said in a statement that it was the first quarterly increase in new orders in more than five years, excluding the first half of 2010 when consumers were buying homes largely because of a federal homebuyer tax credit.

The average sales prices of homes delivered increased 3 percent to $247,000 from $240,000. Sales incentives rose to $33,600 per home delivered from $30,600 per home delivered in the prior-year period.

Lennar said its cancellation rate was 20 percent for the quarter, while backlog climbed 16 percent to 2,519 homes.

The company’s Rialto division, which buys troubled loans and properties from banks, reported that its operating earnings fell to $11.7 million from $18.5 million while revenue climbed to $42.1 million from $38 million.

Stuart predicted that the company would be profitable in the fourth quarter and for the full year, assuming market conditions remain stable.

Lennar has operations in 17 states and is the third-largest homebuilder in the U.S., based on homes delivered last year.