Homebuilder Lennar Posts Surprise First-Quarter Profit

LennarLennar Corp. (LEN) posted a surprise fiscal first-quarter profit as the homebuilder controlled costs and hedged against housing woes by purchasing troubled loans and properties from banks.

But the Miami company delivered fewer homes and reported a decline in new home orders.

Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

Lennar said Tuesday that it earned $27.4 million, or 14 cents per share, for the period ended Feb. 28. That compares with a loss of $6.5 million, or 4 cents per share, a year ago.

Analysts surveyed by FactSet expected a loss of 5 cents per share.

Lennar said its performance marked its fourth straight quarter of profitability. The company cut costs and expenses for its homebuilding division to $447.8 million from $502 million during the period. Its selling, general and administrative expenses fell 7 percent.

Homebuilders are hoping to see improved sales this spring after a dismal 2010 that marked the fifth consecutive year that new home sales declined. Lennar President and CEO Stuart Miller remains cautious on the spring, but is upbeat about the company's prospects for the year.

"While it is unclear whether the spring selling season will gain momentum or continue its sluggish recovery, we are confident that our company is well positioned for a profitable year in 2011," he said in a statement.

Lennar's quarterly revenue dropped 3 percent to $558 million from $574.4 million, but topped Wall Street's $514.6 million.

The average sales price of homes delivered fell 7 percent, while the number of home deliveries dropped 4 percent, excluding unconsolidated entities, to 1,903 homes from 1,988 homes in the prior-year period.

Lennar trimmed sales incentives to $33,100 per home delivered in the first quarter compared with $37,100 per home delivered a year earlier. Reducing incentives has helped Lennar to drive up gross margins and increase its bottom line.

The company's Rialto unit, which buys troubled loans and properties from banks, posted a $23 million operating profit compared with a loss of $1 million a year earlier.

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