Lennar Corporation (NYSE: LEN, LEN.B), on Tuesday reported net earnings of $144.1 million, or $0.63 per diluted share, compared to net earnings of $115.0 million, or $0.50 per diluted share for its first quarter ended February 29, 2016.
New home deliveries were up 12% to 4,832 homes, with new orders up 10% to 5,794 homes – up 10%. The dollar value of new orders was up 15% to $2.1 billion, and homes in backlog rose 13% to 7,670 homes with a dollar value of $2.8 billion, up 19%.
Total revenue was $2.0 billion, up 21% from the same period last year, with operating earnings of $220.6 million, compared to $207.6 million, a 6% rise. Gross margin on home sales was 22.7%, down from 23.1% in Q1 2015. S,G&A as a percentage of revenue from home sales improved to 10.8% from 11.4% in Q1 2015, and operating margin on home sales improved to 11.9% from 11.7% in Q1 2015.
Among other units, Lennar Financial Services reported operating earnings of $14.9 million, compared to $15.5 million in last year's quarter. Rialto operating earnings (net of non-controlling interests) were $1.9 million, compared to $4.6 million,
and Lennar Multifamily operating earnings were $12.2 million, compared to an operating loss of $5.7 million.
Lennar Multifamily Venture received an additional $300 million of equity commitments, increasing total equity commitments to $1.4 billion.
Lennar ended the quarter with homebuilding cash and cash equivalents of $511 million and a debt to total capital ratio, net of cash and cash equivalents, of 45.3%. In March 2016, Lennar issued $500 million of 4.750% senior notes due 2021
Stuart Miller, Lennar CEO, said, "We are very pleased with our first quarter results as we achieved pre-tax earnings of $201.7 million, our highest first quarter pre-tax earnings since 2006. Despite global economic concerns and volatility in the stock market, our net earnings increased 25% year-over-year and we had solid performances in most of our businesses. We continue to believe that the housing market is continuing its slow and steady recovery driven by years of under production, tight inventory levels, attractive interest rates and the lowest unemployment levels since 2008."
Miller continued, "Our core home building business continued to produce strong operating results in the first quarter of 2016 as gross and operating margins were 22.7% and 11.9%, respectively. The continued focus on digital marketing helped to improve S,G&A as a percentage of revenues from home sales to 10.8%, our lowest first quarter percentage. In the first quarter of 2016, our average sales price of homes delivered increased 12% year-over-year to $365,000, the highest in the company's history, from $326,000 in the first quarter of 2015. Our home sales revenues and new orders dollar value increased 25% and 15%, respectively, compared to the same period last year. Our sales backlog dollar value increased 19% from last year to approximately $2.8 billion, keeping us well positioned going forward.
"Complementing our homebuilding business, our Financial Services business reported strong earnings of $14.9 million in our first quarter, consistent with prior year, despite a decrease in refinance transactions year-over-year.
"Our Multifamily business generated $12.2 million of earnings in the first quarter of 2016, primarily due to the sale of an apartment property by one of its joint ventures. In addition, during the first quarter of 2016, the Lennar Multifamily Venture continued to grow as it received an additional $300 million of equity commitments, increasing its total equity commitments to $1.4 billion.
"Finally, our Rialto business generated $1.9 million of income as the turmoil in the capital markets in the first quarter impacted the short-term performance of our Rialto mortgage finance and investment management businesses. While the volatility in the markets leads us to reduce Rialto's earnings expectations for the current year, it also has provided excellent investment opportunities to grow our best-in-class investment management platform."
Miller concluded, "We began fiscal 2016 with strong operational results and a solid balance sheet. We believe we are well positioned across all of our platforms and for another year of strong profits in 2016."