Lennar Corporation (NYSE: LEN and LEN.B), Miami, today reported net earnings of $796.1 million, or $2.42 per diluted sharere, for its fourth quarter ended November 30, 2018. The gain compares with a gain of $309.6 million, or $1.29 per diluted share, in the fourth quarter of 2017. Net earnings attributable to Lennar for the year ended November 30, 2018 were $1.7 billion, or $5.44 per diluted share, compared to $810.5 million, or $3.38 per diluted share for the year ended November 30, 2017.
The results included a gain of $0.58 per diluted share related to the gain on sale of Rialto investment and asset management platform, partially offset by non-recurring expenses
($0.09) per diluted share related to backlog/construction in progress write-up related to purchase accounting and a gain of ($0.03) per diluted share related to CalAtlantic acquisition and integration costs. Excluding these items, EPS would have been $1.96 per diluted share, slightly ahead of the Wall Street consensus estimate of $193 per share.
Among the operating metrics:
Deliveries of 14,154 homes – up 64%
New orders of 10,611 homes – up 44%; new orders dollar value of $4.2 billion – up 49%
Backlog of 15,616 homes – up 75%; backlog dollar value of $6.6 billion – up 85%
Revenues of $6.5 billion – up 71%
Lennar Homebuilding operating earnings of $803.4 million, compared to $478.8 million
Gross margin on home sales of 21.4%, compared to 22.4%
S,G&A expenses as a % of revenues from home sales improved to 7.9%, compared to 8.4%
Operating margin on home sales of 13.5%, compared to 14.0%
Lennar Financial Services operating earnings of $58.7 million, compared to $42.1 million
Lennar Multifamily operating earnings of $33.0 million, compared to $38.6 million
Lennar Homebuilding cash and cash equivalents of $1.3 billion
Repurchased six million shares for approximately $250 million under our stock repurchase program
Lennar Homebuilding debt to total capital of 36.9%
For he full fiscal years, perating results included:
Net earnings of $1.7 billion, or $5.44 per diluted share, compared to net earnings of $810.5 million, or $3.38 per diluted share, which includes the following:
$0.60 per diluted share related to the gain on sale of Rialto investment and asset management platform, partially offset by non-recurring expenses
($1.02) per diluted share related to backlog/construction in progress write-up related to purchase accounting
($0.38) per diluted share related to CalAtlantic acquisition and integration costs
($0.11) per diluted share related to one-time non-cash write down of deferred tax assets, partially offset by tax benefits from accounting method changes and energy credits
Excluding these items, EPS would have been $6.35 per diluted share
Deliveries of 45,627 homes – up 55%
New orders of 45,826 homes – up 51%
Revenues of $20.6 billion – up 63%
Retired $1.4 billion of Lennar Homebuilding senior notes
Stuart Miller, executive chairman of Lennar, said, “During the fourth quarter, we continued to experience slower sales due to higher home prices and rising mortgage rates, consistent with what we highlighted on our third quarter conference call. We continue to believe that the housing market is adjusting to a temporary disconnect between sales prices and buyer expectations and that the basic underlying fundamentals of low unemployment, higher wages and low inventory levels remain favorable.”
“During the fourth quarter, we advanced our strategy of reverting to our pure-play core home building platform. We completed the sale of our Rialto investment and asset management platform for $340 million. Additionally, in the fourth quarter, we contracted to sell our Berkshire Hathaway real estate brokerage business and the majority of our retail title business along with our title insurance underwriter. Both of these transactions closed in the first quarter of 2019.”
“In the fourth quarter, our cash flow generation remained strong. Our balance sheet was well positioned with $1.3 billion of cash and home building debt to total capital of 36.9%, an 800 basis point improvement over last year. During the quarter, we retired $275 million of home building debt, bringing the aggregate retirement of our home building and Rialto bonds to $1.7 billion since our acquisition of CalAtlantic in February 2018, without issuing new debt. We also opportunistically repurchased six million shares of our common stock for approximately $250 million during the quarter.”
Rick Beckwitt, CEO of Lennar, said, “In spite of somewhat softer market conditions, we produced strong results in the fourth quarter of 2018. Our core home building operations continued to leverage our size and scale in the leading markets and drive operational excellence. Our home building gross margin was 22.1% when adjusted to eliminate the effects of the write-up of CalAtlantic backlog and construction in progress in purchase accounting, while our SG&A of 7.9% marked an all-time, quarterly low.”
“Complementing our homebuilding business, our Financial Services operating earnings increased to $58.7 million from $42.1 million last year, expanding its platform across a greater number of deliveries, which was partially offset by the year-over-year reduction in refinance activity.”
Jon Jaffe, President and Chief Operating Officer of Lennar, said, “During the fourth quarter, we completed all aspects of the CalAtlantic integration, which now allows us to operate under one platform leading to even greater efficiencies in all parts of our business. In addition, we exceeded our previously announced 2018 synergies and are on target to meet the 2019 synergies.”
Mr. Miller concluded, “With a solid balance sheet, strong cash flow generation and continued execution of our core operating strategies, we believe that we are well positioned to continue our solid performance into 2019. However, due to continued softness and uncertainty at this seasonally slower time of year, we are deferring guidance for fiscal year 2019 until the markets further define themselves.”
