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UPDATE 2-Lennar's handy profit beat highlights strong spring selling season
June 20, 2017 / 10:30 AM / 3 months ago

UPDATE 2-Lennar's handy profit beat highlights strong spring selling season

* Q2 EPS $0.91 vs est $0.78

* Orders rise 11.8 pct, home sales jump 14.7 pct

* Shares hit record high (Adds context, analyst comment)

By Ankit Ajmera

June 20 (Reuters) - Lennar Corp reported a higher-than-expected quarterly profit on Tuesday, as it sold more homes at higher prices during the crucial spring selling season, boding well for rivals D.R. Horton Inc and PulteGroup Inc.

The No. 2 U.S. homebuilder’s shares rose as much as 5.7 percent to a record high of $55.75, boosting stocks across the sector. Top homebuilder D.R. Horton’s shares were up 2 percent, while those of PulteGroup rose 1.6 percent.

Lennar Chief Executive Stuart Miller said the company was seeing “more of a reversion to normal” in the housing market.

“These strong results were supported by an improved macroeconomic environment, renewed optimism, wage and job growth, and increased consumer confidence,” Miller said in a statement, adding that Lennar’s results were contrary to recent reports on housing starts and building permits.

Although robust job growth is supporting demand in the housing market, housing starts dropped 5.5 percent in May, hitting their lowest level since September 2016.

Economists attributed the decline to ongoing shortages of skilled labor and building lots, rather than demand for housing.

“We believe Mr. Miller’s comment should be viewed as a bullish take for all of the public homebuilders since Lennar has a national footprint,” Wedbush Securities analyst Jay McCanless wrote in a note to clients.

The broader PHLX Housing index rose as much as 1 percent to its highest in nearly 12 years.

Lennar said its home sales jumped 14.7 percent to 7,710 and average sales price increased 3 percent in the second quarter ended May 31 - traditionally the strongest period for U.S. homebuilders.

Orders, a key indicator of future revenue for homebuilders, increased 11.8 percent to 8,898 units.

Net income attributable to Lennar fell to $213.6 million, or 91 cents per share, in the second quarter, from $218.5 million, or 95 cents per share, a year earlier.

The quarter included acquisition-related expenses, which hurt Lennar’s margins.

Analysts on average had expected earnings of 78 cents, according to Thomson Reuters I/B/E/S.

Total revenue rose to $3.26 billion from $2.75 billion.

Up to Monday’s close, Lennar’s stock had risen about 23 percent this year, compared with an 18.9 percent jump in the broader housing index. (Reporting by Ankit Ajmera in Bengaluru; Edited by Martina D‘Couto)

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