Lennar Corp., Miami (NYSE:LEN) on Tuesday morning reported a net profit of $32.0 million, or $0.17 per diluted share, for its fiscal fourth quarter ended Nov. 30, 2010, compared to a profit of $35.6 million, or $0.19 per diluted share, in the comparable period in 2009. It was the company's third consecutive profitable quarter.

Analysts were expecting a profit of $0.03 per share. Shares of Lennar shot up in heavy pre-market trading Tuesday and were up more than 8% shortly after the open, helping fuel a rally throughout the home-building sector as the markets overall moved higher.

The results included $22.3 million in impairments, down from $55.5 million in the fiscal fourth quarter of 2009.

The results came even as revenue decreased 13% in the quarter to $725.8 million as deliveries fell 12% to 3,060 homes and the average sales price remained flat with last year's quarter at $238,000. Sales incentives totaled $33,700 per home, or 12.4% as a percentage of home sales revenue, compared to $36,300 per home delivered, or 13.2%, in the same period last year.

New orders, including unconsolidated joint ventures, were down 5% to 2,520 homes (24 from JVs, up from 10 in last year's quarter). New order dollar value was down from $669.8 million to $585.5 million. The cancellation rate was 20%, flat with last year's quarter.

Backlog was down 2% to 1,604 homes with an aggregate value of $407.3 million, down from $479.6 million at the close of fourth quarter, 2009.

Gross margins on home sales improved to 17.7%, or $128.7 million, from 11.1%, or $92.2 million, in the same period in fiscal 2009. SG&A was down 24% to $32.7 million in the quarter, compared to the same period last year. As a percentage of revenues from home sales, SG&A was down to 14.1% from 16.2%.

Lennar reported a loss from unconsolidated entities of $1.7 million in the quarter compared to a loss of $25.8 million in the 2009 quarter, which included $20.9 million of valuation adjustments.

Operating earnings for the Lennar Financial Services segment was $11.7 million in the fourth quarter of 2010, compared to $7.8 million in the same period last year.

The company reported operating earnings for the Rialto Investments segment of $25.1 million (including $12.7 million of net earnings attributable to noncontrolling interests), compared to an operating loss of $1.0 million in the same period last year. In September 2010, Rialto Investments completed the acquisitions for $310 million of approximately $740 million of distressed real estate assets, in separate transactions, from three large institutions, including 397 loans with a total unpaid principal balance of approximately $529 million and 306 REO properties with an appraised value of approximately $211 million. In November 2010, Rialto completed its first closing of a real estate investment fund with initial equity commitments of approximately $300 million (including $75 million committed by Lennar).

In October, Lennar retired the remaining $99.2 million of its 5.125% senior notes due October 2010 for 100% of the outstanding principal amount plus accrued and unpaid interest as of the maturity date. In November, it issued$446 million of 2.75% convertible senior notes due 2020 in a private offering.

Also in November, Lennar entered into a $150 million Letter of Credit and Reimbursement Agreement that may be increased to $200 million. The company at the time terminated its cash-collateralized letter of credit agreements with two banks with a capacity totaling $225 million, giving it access to cash previously restricted to collateralize letters of credit under the agreements.

Lennar ended the quarter with cash and cash equivalents of $1.2 billion. The home building debt-to-total-capital ratio, net of cash and cash equivalents, was 42.4%. Debt rose to $3.1 billion from $2.8 billion at the end of fiscal 2009.

Profit for the year ended November 30, 2010 was $95.3 million, or $0.51 per diluted share, compared to a net loss of $417.1 million, or $2.45 per diluted share, for the 2009 fiscal year. Revenue fell 1% to $3.1 billion on deliveries of 10,955 homes, down 5%. New orders were down 5% for the fiscal year to 10,928. The cancellation rate for the year was 17%.

"Although high unemployment, tight lending standards and low consumer confidence continue to present challenges for the housing industry, we are confident that 2011 will be another profitable year," said Stuart Miller, Lennar president and CEO. "Our home building segment is on the right track to achieving sustainable profitability and our Rialto Investments segment will enhance our earnings as the housing market stabilizes and ultimately recovers."

Analysts were impressed.

"Lennar's core home building operations performed well in our opinion with all key metrics exceeding our forecast (except impairments)," wrote Carl Reichardt at Wells Fargo in his research note.

David Goldberg at UBS wrote, "Lennar is among the best-positioned home builders heading into '11, as its operating acumen, combined with opportunities from Rialto, should allow for profitability even if the broader market declines."

Michael Rehaut at J.P. Morgan wrote, "We view these results positively and believe the stock should react in kind, and furthermore, we believe support our 'Overweight' thesis, which calls for a greater valuation premium to its peers due to the company¹s solidly positive EPS, above average margins and accretive Rialto division."

Nishu Sood at Deutsche Bank was a bit less sunny. "Lennar reported generally favorable 4Q results, which featured profit strength that we have seen across the group recently as well as a decent order number. Fundamentals generally improved, with both a gross margin beat and better operating leverage; however we note a high proportion of earnings continues to come from non-operating sources, which we believe should be treated differently than homebuilding earnings. For the year roughly 48% of income came from the Rialto division."