Stuart Miller and a construction site (Credit: PxHere)
Lennar’s stock price rose 5 percent on Tuesday after the Miami-based homebuilder posted better than expected earnings amid a surge in new home sales.
The company announced second quarter net earnings of $310.3 million, or $0.94 per diluted share, far exceeding Wall Street’s expectations of $0.45 per share. The earnings were largely driven by new home sales from Lennar’s acquisition of CalAtlantic, which it completed in February, making the Miami company the largest homebuilder in the country.
“Concerns about rising interest rates and construction costs have been offset by low unemployment and increasing wages, combined with short supply based on years of underproduction of new homes,” said Lennar Executive Chairman Stuart Miller in a statement.
He added, “Demand remained strong as we continued to see pricing power support margins while affordability remained consistent.”
Revenue from home sales increased 74 percent in the second quarter to $5 billion from $2.9 billion in the second quarter of 2017, the company reported. The number of new home deliveries increased 57 percent to 12,078, and the average sales price of homes delivered increased 11 percent to $413,000 during the quarter. Both were driven primarily by the CalAtlantic acquisition.
Lennar earnings are positive news for homebuilders as the industry battles rising construction costs. These costs along with a labor shortage of construction workers have caused a supply shortage of single-family homes.
The company is now in the process of integrating CalAtlantic, which it acquired for $9.3 billion. Analysts said the deal helped Lennar gain scale to boost its negotiating power for labor, supply and land costs.
The company’s stock (NYSE:LEN) closed at $51.61 on Tuesday, up nearly 5 percent from its opening price.
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