Lennar Corporation (LEN) reported adjusted net income of $28.3 million or 15 cents per share for the fourth quarter of fiscal 2010, improving significantly from the prior-year net loss of $284.9 million or $1.56 per share. The adjusted figures excluded tax benefits of about $3.7 million during the fourth quarter of 2010 and that of $320.5 million during the fourth quarter of last fiscal. Adjusted earnings per share were considerably higher than the Zacks Consensus Estimate of 3 cents.
Including the tax benefits, Lennar reported net income of $32.0 million or 17 cents per share compared with net earnings of $35.6 million or 19 cents per share during the 2009 fourth quarter.
On the other hand, revenues for the quarter declined 6% y/y to $860.1 million due to a fall in homebuilding revenues despite the improved performances by the Financial Services and the Rialto Investments. However, revenues for the quarter improved compared with the Zacks Revenue Estimate of $779 million.
Performance by Segment
Homebuilding revenues were $761.4 million, down 11% from $856.4 million realized during the fourth quarter of last year. The drop in revenues was attributed to reduced home deliveries as well as fewer new orders. Home deliveries fell to 3,089 in the fourth quarter this year from 3,496 last year and home orders went down to 2,520 this quarter from 2,652 in the prior-year quarter. Operating earnings from Lennar homebuilding were $27 million in contrast to a loss of $276.8 million in the corresponding period of 2009.
Lennar Financial Services generated revenues of $79.1 million, up 38% from $57.3 million a year back. Operating earnings for the segment rose to $11.7 million from $7.8 million in the fourth quarter of 2009, driven by higher volume and profits per loan in the segment’s mortgage operations.
Revenues from the Rialto Investments were $19.7 million while the corresponding quarter of last year saw no contribution to total revenues of the company from this segment. The segment posted operating earnings of $25.1 million (out of which $12.7 million was attributable to non-controlling interests) compared with an operating loss of $1.0 million in the same period last year.
Fiscal 2010: A synopsis
Lennar’s full year adjusted net income was $69.6 million or 37 cents per share excluding tax benefits worth $25.7 million. Adjusted earnings per share exceeded the Zacks Consensus Estimate of 34 cents. Besides, full year revenues were down 1% year-over-year to $3.07 billion from the last fiscal but beat the Zacks Revenue Estimate of $2.93 billion. Including the tax gains, the full year net income was $95.3 million or 51 cents per diluted share compared with a net loss of $417.1 million or $2.45 per share realized a year ago.
Financial Position
Lennar Corporation had cash and cash equivalents worth $1.21 billion and total debt of $3.13 billion from homebuilding as of November 30, 2010 versus $1.33 billion of homebuilding cash and $2.76 billion of homebuilding debt, respectively. Besides, homebuilding net debt-to-capitalization ratio stood at 42.4% as of the same date compared with 36.9% as of November 30, 2009.
The company’s efforts enveloping the essential cost reduction steps, gradual expansion of Rialto Investments along with the PowerSmart program are believed to reap benefits going forward. However, Lennar has potential threats from the overall sluggish economy combined with its deteriorating cash position. In view of the above conditions, we recommend the shares of Lennar Corporation as “Hold” (Zacks #3 Rank) in the short term and “Neutral” in the long term.
The homebuilder is based in Miami, Florida. It also offers various financial services, including mortgage financing and serves customers in Florida, Maryland, New Jersey, Virginia, Arizona, Colorado, Texas, California, Nevada, Illinois, Minnesota, New York, North Carolina and South Carolina. Lennar’s key competitors include DR Horton Inc. (DHI), PulteGroup Inc. (PHM) and KB Home (KBH).
D R HORTON INC (DHI): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis Report
Zacks Investment Research
