Lennar Corp., the third-largest U.S. homebuilder, reported quarterly results that bested Wall Street estimates and said it expected a profitable 2011, sending its shares up more than 7 percent.
The Miami-based builder, which has operations in 14 states, boosted margins by cutting both administrative and manufacturing costs. It also came much closer than its peers to transcending the lackluster economy and stubbornly high unemployment, Morningstar analyst Mike Gaiden said.
"These guys have their act together," Gaiden said, adding that Lennar was doing a better job than most of finding and building in communities where people want to live.
New orders fell only 5 percent to 2,520 homes. Last Friday, competitor KB Home reported a 25 percent drop in orders, in line with the industry average.
Homebuilder confidence remains stuck at historic lows, according to the National Association of Home Builders/Wells Fargo Housing Market Index, which stood at 16 in December. A reading above 50 indicates that more builders view sales conditions as being good than poor. The index has not been above 50 since April 2006.
But against this backdrop, Lennar is optimistic. "We are confident that 2011 will be another profitable year," Chief Executive Officer Stuart Miller said in a statement.
The company was able to reduce sales incentives offered to homebuilders to $32,800 per home from $44,800 per home last year.
Lennar reported earnings of $32 million, or 17 cents per share, for the quarter that ended Nov. 30, compared with $35.6 million, or 19 cents per share, a year ago.
Analysts on average had forecast fiscal fourth-quarter earnings of 3 cents per share, according to Thomson Reuters I/B/E/S.
The year-earlier quarter included a $320.5 million tax benefit, the company said.
Revenue fell 6 percent to $860.1 million.
The company's Rialto segment, which invests in distressed land assets, contributed $12.4 million to the quarter's earnings. Morningstar's Gaiden expects the division to add between 25 cents and 50 cents to earnings per share in 2012.
Lennar's shares were up 7.7 percent at $20.35 in early trading.
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