Thursday, June 26, 2008

Lennar Posts Disappointing Losses Again

Lennar, the second-largest US homebuilder, posted a second-quarter loss of $121 million.   Around 60 cents a share out of the 76 cents a share in losses was attributed to more write-downs, indicating that the company is still losing money selling houses.  Revenues declined by 61%, deliveries dropped 60% and new orders fell 45%.  The average price of a Lennar home fell 8.1% to $274,000 from a year ago and sales incentives rose 11% to $48,700 per house, up from $43,700.  If you didn't think it could get any worse than this, well, you're wrong.  The company issued a gloomy outlook, claiming that it expected further deterioration in the housing market.
A few glimmers of hope could be gleaned from the data if you are an optimist.  Lennar's cancellation rate was 22%, an improvement from the 29% rate a year earlier.  The backlog of homes under contract and not yet sold did fall 56% to $1.25 billion, indicating that the company was working through its inventory.  I still maintain that the homebuilders are in for a world of hurt with some bankruptcies down the line.  While I'm not issuing any downgrades on the stock because I've believed all the homebuilers have been a sell for some time, maybe I can just add it to my conviction list.   

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