Homebuilder Lennar Revenue Surges, Tax Reform Earnings Switch

Homebuilder Lennar revenue rose 12% in Q4 earnings from the steady housing recovery.$LEN is benefitting from favorable interest rates and increased consumer confidence. Net earnings fell with key transactions moved to the upcoming quarter after Republican Tax Reform.

Homebuilder Lennar revenue rose 12% in Q4 earnings from the steady housing recovery.$LEN is benefitting from favorable interest rates and increased consumer confidence. Net earnings fell with key transactions moved to the upcoming quarter after Republican Tax Reform.

Lennar

Lennar announced a surprise drop in fiscal fourth quarter earnings from the result of transaction timing changes to best advantage the company from new tax legislation in 2018.

Reaction: Lennar Corporation NYSE: $LEN 66.92 +0.26 (+0.40%)

Earnings:- 3.7% to $1.29 per share as revenue surged 12% to $3.79 billion. Consenus was for a rise of 10.4% to $1.48 per share, on revenue of $3.57 billion.

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Highlights

  • $LEN revenues from home sales grew 14% in 4Q17 to $3.3Bil,
  • $LEN delivered 5% more houses at 8% higher average sales price compared to last year.
  • $LEN said its orders were up 12% YoY to 7,357 homes, tallying to a total value of $2.8Bil.
  • Backlog for the quarter of 8,935 homes, were up 17% over the same quarter last year.

Outlook:

Lennar’s pending acquisition of CalAtlanticCAA which will make it the nation’s largest homebuilder, will close on Feb. 12.

The tax reform law will reduce its effective tax rate in 2018 from 34% to approximately 25%. That excludes a one-time non-cash write-down of our deferred tax assets of approximately $70 million, which will be recorded in the first quarter of 2018 as a result of the lower effective tax rate.

The GOP tax legislation affect the housing market in 2018 is seen as  boosting consumer incomes and confidence overall, but potentially hurting the housing market in high-tax states hit by the limit on deductions for state and local taxes.

KB Home $KBH reports after the close on Wednesday. KB Home is expected to see EPS soar to 93% to 77 cents on sales growth of 13.9% to $1.36 billion. Citi downgraded KB Home to sell last week because of it’s 31% exposure to California and the likelihood it will write down the value of deferred tax assets from past losses.

Source: Lennar, AlphaStreet

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