NEW YORK – Lennar Corp. (LEN), the No. 3 U.S. home builder, Tuesday reported higher quarterly profit and raised its outlook for the year, citing a booming housing market, particularly on the East and West coasts.
Earnings from continuing operations rose to $233.2 million, or $1.42 per share, for the second quarter ended May 31 from $201.2 million, or $1.22 per share, a year earlier.
Analysts on average were expecting $1.31 a share, according to Reuters Estimates.
Shares of Lennar rose more than 2 percent.
Low mortgage rates and steady demand for primary residences, second homes and investment properties continue to fuel demand for homes.
In addition, new lending products, such as interest-only and adjustable-rate mortgages (search), have allowed buyers to borrow more money with lower payments at the beginning of the loan.
"The population is generally employed, and incomes are increasing, and that population is going to find a way to afford their new home." Lennar Chief Executive Stuart Miller said in a conference call with analysts.
Municipalities also have become stingier with building permits. The tight supply of buildable land has pushed up prices and strengthened the power and market share of the top U.S. home builders.
"Is this a cyclical move in prices, or is there a basic change in the home-building industry where the higher prices reflect the difficulty in getting permits?" said Ed Wachenheim of Greenhaven Associates, a money management firm with $3.2 billion under control. "There may be some of both."
Lennar raised its earnings forecast for the fiscal year to $7.80 per share from continuing operations from its previously raised outlook of $7.15. Analysts' average forecast is $7.21 per share.
The company's estimate excludes a charge of 13 cents per share for redeeming 9.95 percent senior notes.
In the latest quarter, net earnings, including discontinued operations, rose to $243.5 million, or $1.48 per share, from $201.4 million, or $1.22 per share, a year earlier.
Gross margins on home sales rose about 150 basis points to 24.9 percent.
Revenue, which includes the Miami-based company's financial services operations and unconsolidated operations, rose to $2.93 billion from $2.34 billion.
Home-building revenue rose to $2.8 billion, up from $2.21 billion. Revenue from land sales rose to $179 million from $147 million.
Of the mortgages Lennar originated -- about 68 percent of its total -- about 47 percent were traditional fixed-rate loans and 53 percent were variable-rate loans. Of the variable-rate loans, 83 percent had the rates fixed for between three and 10 years.
Interest-only loans accounted for 27 percent of those Lennar originated, Chief Financial Officer Bruce Gross said.
Lennar closed on 9,210 homes during the quarter, up from 7,927 a year earlier. The average price of a home rose 10 percent, to $293,000. New home orders for the quarter, which are not part of second-quarter revenue, rose 5.5 percent to 12,095.
Lennar ended the quarter with a backlog of 20,536 homes contracted for and awaiting construction, up 5.76 percent, while the value of the backlog rose 25 percent to $7.34 billion.