Lennar Corporation (LEN) just posted results for its fiscal year first quarter and investors weren't disappointed. The company is one of the largest homebuilders and sales continued to rebound in the wake of low interest rates and high rents.
Strong home sales boosted revenue and earnings again.
Lennar has put up a string of impressive results over the past four quarters including year-over-year revenue growth of 22%, 34%, 42% and 37%, respectively.
Last quarter, the company posted sales of $990 million thanks to a 28% lift in home deliveries. New orders were up 34% and the backlog in dollars climbed 105% to $1.5 billion.
Importantly, homebuilding margin growth continued as more activity was leveraged against fixed costs. Gross margins increased 120 basis points to 22.1% and operating margins increased 410 basis points to 10.1%.
The margin strength was supported by pricing power, reflected by the following quote from their earnings press release:
"Supply continues to be limited by low home inventories and fewer competing homebuilders. Accordingly, pricing trends have been positive, as shown by a 13% increase in the average sales price of homes in our backlog at quarter-end, compared to last year." CEO Stuart Miller.
With housing inventory tight, it's likely last quarter's strength will continue into the important warm weather months.
Industry wide, housing data released this week suggests Lennar, along with competitors including Pulte Homes (PHM), D R Horton (DHI), Toll Brothers (TOL) and K B Homes (KBH) will continue to enjoy tailwinds.
In February, building permits were up 33.8% from a year ago. This suggests there's plenty of interest in monetizing the industries currently undeveloped inventory of lots.
Even the more volatile housing starts were 27.7% above last year. If you take into account the 13.7% margin of error, starts remained up double digits from a year ago -- pretty impressive considering it's winter.
Additionally, completions jumped 24.3%, which suggests earnings momentum for the current quarter. If so, results should not only translate into higher prices for the builders, but for suppliers and retailers including U S G Corp (USG) and Home Depot (HD).
Finally, data from the Seasonal Investor suggests this is a good time to consider housing stocks. Since inception, the S&P Homebuilder ETF (XHB) has climbed an average 3.89% in March and 6.89% in April.
Source: Seasonal Investor