Lennar Posts Worse-Than-Expected Q2 Loss, Says Q3 May Be Worse

Lennar Corp. posted a $1.55/share ($244 million) Q2 net loss, reversing last year's $2/share ($325 million) gain. After write-offs on option deposits and other items, its loss was $0.22. Revenue plunged 37% from $4.58 billion to $2.88 billion. Analysts were calling for earnings of $0.05/share on revenue of $2.58 billion. New orders were down 31% to 8,056, homes delivered dropped 29% to 9,568, and its average home price fell 7.5% to $298,000 from $322,000 -- mainly due to a 77% jump in sales incentives to $43,700 per home. The number-one U.S. homebuilder (by revenue) said the market "has continued to deteriorate throughout the second quarter," and foresees "weak and perhaps deteriorating market conditions" ahead in Q3. CEO Stuart Miller said the company has been forced to revalue its properties based on current market conditions. Morningstar Analyst Eric Landry notes that Lennar cut its land inventory before other builders, has reduced its debt, and has an impressive management. "They are positioned to exit this downturn, whenever it comes, as a stronger company than when they entered it," he said. New-home sales come out at 10 a.m. ET. The average 30-year mortgage is 6.60 percent, their highest in almost one year.

Sources: Press release, MarketWatch, Bloomberg
Commentary: Homebuilders Sinking Into the Subprime Mess • Housing Double Dips Offer Short Opportunities • Jim Cramer's Take on LEN
Stocks/ETFs to watch: Lennar Corp. (LEN). Competitors: D.R. Horton Inc. (DHI), Pulte Homes Inc. (PHM), Centex Corp. (CTX), Toll Brothers Inc. (TOL), Beazer Homes USA Inc. (BZH). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones U.S. Home Construction (ITB), PowerShares Dynamic Building & Construction (PKB)

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