Lennar Corp. (NYSE:LEN), Miami, beat the street handily Thursday morning with a fiscal second quarter profit of $39.7 million ($0.21 per diluted share). The profit beat analyst expectations of a flat-to-slightly-up quarter and compared favorably to a net loss of $125.2 million (-$0.76 per diluted share), for the comparable quarter in 2009.

The profit for the quarter, which ended May 31, was boosted by an $11 million income tax benefit and lower-than-expected impairments and land-related write downs of $6.1 million, down from $99.1 million in the comparable quarter last year.

Revenues from home sales decreased 12% from the prior-year quarter to $694.8 million due to an 8% decrease in deliveries to 2,902 and a 5% decrease in the average sales price of homes delivered to $240,000. The price decrease was primarily due to a shift in product mix as fewer deliveries occurred in the company's west region. Sales incentives as a percentage of home sales revenue improved to 11.5% from 17.3% in the second quarter of 2009 and 12.5% in the first quarter of 2010.

New orders declined 10% from last year's quarter to 3,207 homes, with the drop coming entirely during the month of May, according to Lennar CEO Stuart Miller. Dollar value of new orders declined 12.8% to $778 million.The cancellation rate was 17%, up from 13% in the first quarter and 15% at the same time last year.

Backlog rose 21% to 2,499 homes, with dollar value up 20.2% to $655.9 million.

Gross margin on home sales was 20.6%, up 1,100 basis points from last year's quarter and 140 points from the first fiscal quarter of 2010. SG&A fell to $96.8 million from $112.5 million in the 2009 quarter, representing an improvement of 40 basis points to 13.9% of sales.

Lennar's Rialto Invesments unit contributed $5 million in operating earnings to the bottom line, largely due to earnings from FDIC loan portfolios acquired during the first quarter.

During the quarter, the company issued $250 million of 6.95% senior notes due 2018 and $276.5 million of 2.00% convertible senior notes due 2020, and it retired $289.4 million in 5.125% senior notes due October 2010, 5.95% senior notes due 2011 and 5.95% senior notes due 2013 through a tender offer.

Lennar ended the quarter with cash, equivalents and restricted cash of $1.2 billion. It listed $2.89 billion in home building debt on the balance sheet.Net debt-to-capital was 42.2%, up from 32.9% at the end of the 2009 quarter.

In the earnings report, CEO Miller remained upbeat in his statement. He noted that the second-quarter performance put the company into profit for the fiscal year to date and said, "Although challenges still remain in the housing market, we believe that our core businesses are on the right track to achieving sustainable profitability."

"While we were disappointed with the slow down in new orders in May, we believe that this will be temporary and that the market will improve in the second half of 2010," Miller said. "The tax credit expiration accelerated sales activity to the pre-May period and it may take a couple of months for demand to rebuild, driven by tremendous home price affordability and historically low interest rates."

UBS home building analyst David Goldberg concurred in a Thursday morning research note. "We agree with the company's assessment that conditions are likely to be constrained over the next few months as demand normalizes following the tax credit expiration. Further, we expect stability toward year end as the broader economy gradually improves."

Goldberg raised his earnings target for Lennar for the fiscal year from 10 cents to 20 cents per share but left his price target on the stock at $18.He noted, however, that the Rialto portfolio could provide an upside boost.

Shares of Lennar were trading down slightly less than 1% at $14.60 by late morning on a down day for the three major market indices and most of the home builder segment.