LEN Lennar Corp

By Lisa Beilfuss 

Lennar Corp. said profit in its latest quarter soared as an ongoing recovery in the housing market led to an increase in deliveries and higher selling prices for the home builder.

The housing market continued to improve in a slow and steady manner, Chief Executive Stuart Miller said, echoing what the Federal Reserve's monetary policy-setting arm said in its statement last week. Mr. Miller said there is pent-up demand driven by a large production deficit built up over the last several years, an growing millennial population, reasonable affordability levels and high rental-occupancy rates.

For the Miami-based builder, which has been focused on the higher-end first-time buyer and move-up market, deliveries during the quarter increased a better-than-expected 16% while the value of new orders rose 20% to $2.34 billion. The average sale price of homes delivered gained 5% to $350,000.

Higher land costs, which surged 56% from last year's quarter, offset the higher selling price and pushed Lennar's gross margin down to 24.1% from 25.2%. Analysts were expecting a steeper decline, but the surge in closings and incentives that were little changed from a year earlier were behind the gross-margin beat, said Jay McCanless, an analyst at Sterne Agee.

New orders, considered an indicator of a builder's future performance, jumped 10% to 6,495 homes. But order growth slowed sequentially and fell short of analysts' expectations. Mr. McCanless called second-quarter order growth "the only wrinkle" in the fiscal third-quarter report, primarily due to a 12% drop from a year earlier in the company's energy-linked Houston segment. Orders rose across the rest of Lennar's geographic segments.

In all, Lennar reported a profit of $223 million, or 96 cents a share, up from $177.8 million, or 78 cents a share, a year earlier. Revenue grew 24% to $2.49 billion. Analysts projected 80 cents in per-share profit and $2.42 billion in sales, according to Thomson Reuters.

Shares in the company are up about 18% this year, more than double the gain notched by a basket of home builders' stocks. Lennar rose 2% in morning trading.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

September 21, 2015 11:03 ET (15:03 GMT)

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