DOW JONES NEWSWIRES Lennar Corp. (LEN) swung to a surprise fiscal first-quarter profit as the company benefited from earnings at its Rialto Capital business and a legal settlement, though declines continued at its home building business. The housing market has continued to weaken since the expiration of a federal tax credit for home buyers last year, hurt by a sluggish economy, high unemployment and tight lending standards. New homes sales declined to near a 50-year low during February while sales of previously owned homes also slumped. However, Lennar may avoid some of the worst of the declines, as it caters more to the "move-up" segment of the market. The company also is supported by its Rialto Capital business, which invests in distressed real estate and has been credited for driving Lennar's improved results in recent quarters. In the latest quarter, Rialto swung to the black and generated $11 million of operating earnings. Chief Executive Stuart Miller said Lennar's "strong balance sheet and significant liquidity puts us in an excellent position to purchase new strategic high margin land deals for our homebuilding business and distressed opportunities for our Rialto business." For the quarter ended Feb. 28, Lennar reported a profit of $27.4 million, or 14 cents a share, from a prior-year loss of $6.5 million, or 4 cents a share. The latest period included a net $30 million in other income, primarily from a legal settlement. The prior year included an $11.6 million tax benefit. Revenue decreased 2.9% to $558 million. Revenue from homes sales fell 11% as average sale prices and deliveries declined 7% and 4%, respectively. Analysts polled by Thomson Reuters most recently forecast a loss of 5 cents on revenue of $508 million. Gross margin on home sales rose to 20% from 19.2%. Orders fell 12% to 2,267 homes. The company's backlog, an indication of future business, also fell 12%. The cancellation rate was up at 17% from 13%. Incentives as a percentage of home sales eased to 12.1% from 12.5%. Shares closed Monday at $19.75 and were inactive premarket. -By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com
