(Reuters) - Lennar Corp (LEN.N) on Tuesday reported a better-than-expected quarterly profit as robust housing demand helped it boost prices, shaking off any concerns that rising interest rates could keep homebuyers at bay.
The company also said it expects lumber prices to fall as more lumber inventory is freed up due to increased availability of transportation. Lumber is one of the biggest costs for homebuilders along with labor.
Pessimism around homebuilders related to rising mortgage rates and input costs was overblown, Morningstar analyst Brian Bernard said, adding Lennar’s results showed that demand for residential new construction remains robust.
“There is under supply of existing homes and we see homebuilders benefiting from a demographic tailwind of the maturing millennial population reaching the prime age for homeownership,” Bernard said.
Lennar’s orders, an indication of future revenue for homebuilders, jumped 62.3 percent to 14,440 homes in the second quarter.
The Miami-based builder said it sold 12,095 homes, led by its eastern region, which includes Florida and New Jersey. The company sold 7,710 homes in the quarter last year. The average sales price rose 10.4 percent to $413,000.
The deliveries and price were also helped by the company’s acquisition of smaller rival CalAtlantic last year that increased the backlog of the combined company.
Despite rising interest rates, construction costs, labor shortages and international trade tensions, the housing market has remained resilient, Executive Chairman Stuart Miller said on a post-earnings call with analysts.
Net income attributable to Lennar shareholders rose 45.2 percent to $310.3 million, or 94 cents per share, in the quarter ended May 31.
The company had a charge of $236.8 million related to purchase accounting, and $23.9 million in acquisition and integration costs for its CalAtlantic merger last year.
Excluding items, the company earned $1.58 per share, beating the average analyst estimate of 45 cents per share, according to Thomson Reuters I/B/E/S.
Revenue jumped 67.4 percent to $5.46 billion and topped analysts’ estimate of $5.11 billion.
Reporting by Sanjana Shivdas in Bengaluru; Editing by Maju Samuel and Sweta Singh