NEW YORK (MarketWatch) — Restructurings and other recent actions contributed to a narrower third-quarter loss for Lennar Corp., but the company said the home-building business continues to weaken, and its chief executive called for further government action to help the industry.
Chart of LEN
“While we expected the housing market to remain constrained throughout the third quarter, the weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,” said Lennar Chief Executive Stuart Miller, according to a press release.
The Miami-based builder (LEN 14.06, +0.32, +2.3%) said its third-quarter net loss shrank as revenue dropped 53% from a year earlier.
For the three months ended Aug. 31, the company’s loss was $89 million, or 56 cents a share, compared with red ink of $513.9 million, or $3.25 a share, in the year-earlier quarter.
Quarterly revenue fell to $1.11 billion from the year-earlier quarter’s $2.34 billion, underscoring the slowdown in U.S. residential construction.
A survey of analysts by FactSet Research produced consensus estimates of a loss of 55 cents a share and quarterly revenue of $1.3 billion.
‘[T]he government has yet to act meaningfully to help stabilize home prices.’
— Lennar Corp.
On a positive note, the company widened its adjusted gross-profit margin on home sales by four percentage points from a year earlier, to 18%, and halved its selling, general and administrative expenses.
“Although the federal government has recognized that stabilizing the housing market is critical to solving the current credit crisis, the government has yet to act meaningfully to help stabilize home prices,” the company said.
“While we were encouraged that Congress passed the July housing stimulus bill as a first step, additional government actions will be necessary to help facilitate housing market stabilization, which in turn will help stabilize the financial markets as well.”
Lennar’s calls for government action come at the same time that the chiefs of the Treasury Department and Federal Reserve head to Capitol Hill to field questions about a $700 billion rescue plan for the battered financial markets that the White House says is essential to stabilizing markets, including housing, and shoring up the U.S. economy. See full story.
Nuts and bolts
Lennar’s revenue from home sales fell 54% in the third quarter, to $995.7 million from $2.2 billion in the comparable period during fiscal 2007.
The drop primarily reflected a 49% decrease in the number of home deliveries and a 9% decrease in the average sales price of a delivered home. The company’s home deliveries were lower in each of the company’s home-building segments for the latest quarter, and the average sales price of homes delivered decreased to $270,000 from $296,000 on a year-over-year basis.
Gross margin on home sales excluding SFAS 144 valuation adjustments amounted to $179.4 million, or 18%, in the latest quarter, compared with $304.1 million, or 14%, a year earlier. The company said margins, excluding the accounting issues, rose due to inventory adjustments made during the carnage of the last year.
Lennar’s everyday operating costs, known officially as selling, general, and administrative costs, contracted by 49% in the quarter, to $148 million as staff were laid off and costs were slashed.
Lennar said it lost $28.8 million in the third quarter on land sales, including revaluations and write-offs of land options.
Operating losses at the company’s financial-services operations more than doubled, to $12.9 million from $5.2 million a year ago.
Lennar shares, having lost almost half their value in the past year, rose 1% Tuesday, to $13.84. End of Story
Greg Morcroft is MarketWatch’s financial editor in New York.
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