Tags: LEN | Lennar | homebuilders | stocks

Lennar Makes Good of a Bad Situation

By    |   Tuesday, 07 Jun 2011 12:46 PM

It’s good to be a big dog in a big industry. Lennar (LEN) is a heavyweight in the U.S. homebuilding sector. Because of its size, Lennar is able to handle lower prices and adapt its business activities to navigate tough times in the housing industry, arguably far better than would a smaller homebuilding outfit.

During the first quarter of fiscal 2011, total revenue came to $558 million, down 3 percent from the same quarter a year earlier. Revenue from residential building — the company’s core business — fell 10 percent to $466.7 million.

Those revenues were lower primarily due to a 7 percent drop in the average sales price of homes Lennar delivered.

Not only can bigger companies lower prices and cut costs in tough economic times, they can also invest wisely. Net earnings hit $27.4 million, or 14 cents per diluted share, compared to net loss of $6.5 million a year ago, mainly due to investment activities in distressed real estate assets.

No worries here

"We are pleased to report EPS of 14 cents for our first fiscal quarter of 2011, making this our fourth consecutive quarter of profitability. We were able to achieve these positive results, despite operating in a challenging housing market," says company President and CEO Stuart Miller.

"During the quarter, we remained focused on the core fundamentals of our business, generating profitable results in each of our business segments. Our homebuilding segment continued to produce strong gross margins, benefiting from our intense focus on controlling construction costs and opening new high margin communities."

Economic recovery has improved market conditions, making houses more affordable, say analysts at Zacks Investment Research.

"But surprisingly this has not accelerated the housing activity much as a result of the twin problems of tight credit conditions and a considerable level of contract cancellations."

All that translates into lower home prices, which is bad for home builders, but Lennar is rising above bad headlines.

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It s good to be a big dog in a big industry. Lennar (LEN) is a heavyweight in the U.S. homebuilding sector. Because of its size, Lennar is able to handle lower prices and adapt its business activities to navigate tough times in the housing industry, arguably far better than...
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Tuesday, 07 Jun 2011 12:46 PM
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