Lennar Corp. (LEN) posted earnings Thursday, saying that it returned to profitability in its fiscal second quarter. Any profit at all is better for the homebuilder than the housing market last year, but investors didn’t seem too impressed by the Lennar earnings turnaround as shares LEN stock were off slightly in midday trading.
Here are Lennar’s earnings numbers:
- LEN stock posted net income of $39.7 million and EPS up of 21%, in contrast to losses a year earlier.
- Lennar operating earnings were $29.5 million, in contrast to a loss of -$116.5 million in the fiscal Q2 last year.
- Lennar new housing orders up 24% in the first quarter but down from Q2 2009. Deliveries were up 45% from Q1, but down 8 percent from a year earlier.
- Lennar home sales prices decreased to 5%, and sent net revenues from home sales down 12% from a year earlier. On the plus side, gross margins were 20.6%, up considerably from just 9.6% previously.
Lennar and other builders are having a tough time plotting a way forward. Will record low mortgage interest rates do anything to help a new-construction housing market that near-record lows haven’t? How about the home-builder stocks and indexes that reflect it?
Poor housing news earlier in the week (see story on new May home sales) continues to weigh on the sector. Among ETFs at midday Thursday: SPDR S&P Homebuilders (XHB) was down 2.34%; iShares Dow Jones U.S. Home Construction Index Fund (ITB), was down 1.92%; and PowerShares Dynamic Building & Construction Portfolio (PKB) was off nearly 1.6%.
But relief may be in sight. Freddie Mac announced that average rates on 30-year mortgages fell to a record low of 4.69 percent in its survey for the week ended Thursday. So did 15- and 5- year ARMs.
A break for buyers from lenders could help offset the end of U.S. home buyer tax credits. Fat chance, as banks continue to tighten standards in the wake of a giant crackdown by the Fed and the FDIC. But it’s a nice thought.
One alternative: U.S. Department of Agriculture Rural Development loans. Have the builders thought about this?
As of this writing, Wayne Faulkner did not own a position in any of the stocks or ETF funds named here.
