UPDATE 2-Homebuilder Lennar quarterly revenue beats on higher demand


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(Reuters) – U.S. homebuilder Lennar Corp (LEN.N) on Wednesday reported first-quarter revenue above Wall Street targets as it sold more homes at higher prices, indicating robust demand ahead of the crucial spring selling season.

FILE PHOTO: Newly constructed houses built by Lennar Corp are pictured in Leucadia, California March 18, 2015. REUTERS/Mike Blake/File Photo

Orders, a key indicator of future revenue for homebuilders, rose 30.4 percent to 8,456 homes in the quarter.

The acquisition of smaller rival CalAtlantic Group Inc in February also helped boost the number of homes sold by the Miami-based builder, which rose 24.1 percent in the quarter.

Housing demand in the United States is benefiting from a strong economy and an improving job market even though homebuilders are battling higher raw material costs and shortage of labor.

Chief Executive Officer Stuart Miller expected demand for its homes to remain strong, benefiting from low unemployment and rising wages.

“Buyers (remain) motivated by limited inventory in many areas and the potential for higher rates,” Credit Suisse analyst Susan Maklari wrote in a client note.

The average sales price rose 7.7 percent to $393,000 in the quarter, with Lennar, which mainly sells single-family homes, benefiting from its shortage.

While supply shortage is fueling short-term demand, it is hurting affordability, raising concerns of a slowdown in the long-term.

A Reuters poll in February showed home prices in the United States will rise at double the pace of inflation and wages.

Along with lower affordability, rising borrowing cost is also posing a risk to long-term demand for homes.

Data on Wednesday showed U.S. mortgage applications declined from a seven-week high in the latest week as 30-year home borrowing costs hovered near their loftiest levels in four years.

Net income for Lennar rose to $136.2 million, or 53 cents per share, in the quarter ended Feb. 28, from $38.1 million, or 16 cents per share, a year earlier.

It included costs related to the acquisition and taxes. Excluding items, the company said it earned $1.11 a share.

Revenue rose 27.5 percent to $2.98 billion, beating estimates of $2.65 billion, according to Thomson Reuters I/B/E/S.

The company said it was exploring strategic alternatives for its unit, Rialto Capital Management, and has engaged with Wells Fargo Securities and Deutsche Bank Securities.

Shares of the No.2 U.S. homebuilder rose 1.6 percent to $58 in premarket trading.

Reporting by Arunima Banerjee in Bengaluru; Editing by Arun Koyyur


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