Lennar Q3 Earnings Plunge

Number-one U.S. homebuilder Lennar Corp. said Tuesday morning it lost $514 million ($3.25/share) during the third quarter, a reversal 2006's net earnings of $206.7 million ($1.30/share). Revenue plunged 45% to $2.34 billion, from $4.18 billion a year ago. Analysts, on average, had been expecting a far milder loss of $0.55/share on revenue of $2.39 billion. The company took a $857 million charge ($3.33/share) for valuation adjustments and write-offs. Gross margins fell to 14% from 19.5% as the company was forced to offer attractive incentives in order to lure buyers and deplete an expanding inventory. Home deliveries were down 41% in the quarter, while the price of homes delivered fell 6%. Lennar said home sales and backlogs were poor in all of its regions. The company said it has cut its work force by 35%, and expects more layoffs in Q4. "It is already well documented that the housing market has continued to deteriorate throughout our third quarter," CEO Stuart Miller said. "Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward. Consumer confidence in housing has remained low, while the mortgage market has continued to redefine itself, creating higher cancellation rates." KB Home reports Thursday. Shares trade at $24.18, down from a 52-week high of $56.54.

Sources: Press release, Dow Jones, Bloomberg, Wall Street Journal
Commentary: NAR Cuts Housing Forecasts Again • Moody's Ridiculously Late On Homebuilders' Credit Review • Homebuilders: Hell Fights Back
Stocks/ETFs to watch: LEN. Competitors: KBH, TOL, CEN, DHI, PHM, HOV. ETFs: XHB, ITB

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Comments

[A.D.]

Housing will bottom in 2007! Who do I sound like at the beginning of the Year! HA.