Third Quarter 2024 Highlights - comparisons to the prior year quarter
Net earnings per diluted share increased 10% to $4.26
$3.90, excluding mark-to-market gains on technology investments and one-time items in the Company's Multifamily segment
Net earnings increased 5% to $1.2 billion
New orders increased 5% to 20,587 homes
Backlog of 16,944 homes with a dollar value of $7.7 billion
Deliveries increased 16% to 21,516 homes
Total revenues of $9.4 billion
Homebuilding operating earnings of $1.5 billion
Gross margin on home sales of 22.5%
S,G&A expenses as a % of revenues from home sales of 6.7%
Net margin on home sales of 15.8%
Financial Services operating earnings of $144 million
Multifamily operating earnings of $79 million
Lennar Other operating earnings of $20 million
Homebuilding cash and cash equivalents of $4.0 billion
Years supply of owned homesites of 1.1 years and controlled homesites of 81%
No outstanding borrowings under the Company's $2.2 billion revolving credit facility
Homebuilding debt to total capital of 7.6%
Repurchased 3.4 million shares of Lennar common stock for $519 million
MIAMI, Sept. 19, 2024 /PRNewswire/ -- Lennar Corporation (NYSE:LEN), one of the nation's leading homebuilders, today reported results for its third quarter ended August 31, 2024. Third quarter net earnings attributable to Lennar in 2024 were $1.2 billion, or $4.26 per diluted share, compared to third quarter net earnings attributable to Lennar in 2023 of $1.1 billion, or $3.87 per diluted share. Excluding mark-to-market gains of $39 million on technology investments and one-time items of $89 million in the Company's Multifamily segment, third quarter net earnings attributable to Lennar in 2024 were $1.1 billion, or $3.90 per diluted share. Excluding mark-to-market losses of $16 million on technology investments, third quarter net earnings attributable to Lennar in 2023 were $1.1 billion or $3.91 per diluted share.
Stuart Miller, Executive Chairman and Co-Chief Executive Officer of Lennar, said, "We are pleased to report another solid quarter backed by an economic environment that remains very constructive for homebuilders. Employment was strong, housing supply remained chronically short due to production deficits of over a decade, and demand was solid driven by strong household formation. Although affordability continued to be tested during the quarter, purchasers remained responsive to increased sales incentives, resulting in a 16% increase in our deliveries and a 5% increase in our new orders year over year."
"This week, the Fed decreased interest rates which should start to enhance affordability and accelerate the already strong demand for both new and existing homes. While strong demand, enabled by incentives and mortgage rate buydowns, has driven the new home market over the past two years, we fully expect an even stronger, and more broad-based demand cycle, as rates move lower. Lower rates and controlled inflation will likely boost confidence."
"Against this backdrop, earnings were $1.2 billion, or $4.26 per diluted share. We delivered 21,516 homes in our third quarter and our new orders were 20,587. Our average sales price, net of incentives, per home delivered was $422,000 in the third quarter, slightly down from last year, and our homebuilding gross margin in the third quarter was 22.5%, mildly lower than expectations, and offset by SG&A expenses of 6.7%, which were better than expectations, resulting in a 15.8% net margin."
"Driven by this quarter's strong operating performance, we constructively allocated capital while we continued to strengthen and fortify our balance sheet. During the quarter, we repurchased $519 million of our common stock, had no outstanding borrowings on our $2.2 billion revolver and cash of $4.0 billion, ending the quarter with homebuilding debt to total capital of 7.6%. With cash on hand exceeding our debt, and with overall liquidity of $6.2 billion, our balance sheet remains extremely strong. Against that backdrop, we remain focused on our 'land strategies' initiatives in order to intensify our land light focus and assure consistency of execution now and in the future as we embrace an ever-more focused manufacturing model for Lennar."
Jon Jaffe, Co-Chief Executive Officer and President of Lennar, said, "Operationally, our starts pace and sales pace were 5.4 homes and 5.5 homes per community in the third quarter, respectively, as we continue to move closer to an even flow operating model. Our cycle time was down to 140 days, or 23% lower year over year, as our production first focus has positively impacted our production times, while our inventory turn improved to 1.6 times reflecting broader efficiencies. Concurrently, the Lennar Machine continued to carefully match our sales pace to our production pace using our digital marketing and dynamic pricing models."
"During the quarter, we continued the migration to our land light strategy. This was evidenced by our years supply of owned homesites improving to 1.1 years from 1.5 years last year and our controlled homesite percentage increasing to 81% from 73% year over year. These results drove our return on inventory to 31.3%, a year-over-year improvement of 320 basis points."
Mr. Miller concluded, "We continue to remain enthusiastic about our current execution and our future. We have remained focused on our operating strategies, while at the same time being observant of current economic and market trends. As we look ahead to our fourth quarter, we expect to deliver between 22,500 and 23,000 homes with a gross margin flat with our third quarter. We will continue to fortify our balance sheet with significant liquidity and operate from a position of strength, thus enabling us to continue to execute on our core strategies to drive strong cash flow and higher returns."
RESULTS OF OPERATIONSTHREE MONTHS ENDED AUGUST 31, 2024 COMPARED TOTHREE MONTHS ENDED AUGUST 31, 2023
Homebuilding
Revenues from home sales increased 9% in the third quarter of 2024 to $9.0 billion from $8.3 billion in the third quarter of 2023. Revenues were higher primarily due to a 16% increase in the number of home deliveries, partially offset by a 6% decrease in the average sales price of homes delivered. New home deliveries increased to 21,516 homes in the third quarter of 2024 from 18,559 homes in the third quarter of 2023. The average sales price of homes delivered was $422,000 in the third quarter of 2024, compared to $448,000 in the third quarter of 2023. The decrease in average sales price of homes delivered in the third quarter of 2024 compared to the same period last year was primarily due to pricing to market through an increased use of incentives and product mix.
Gross margins on home sales were $2.0 billion, or 22.5%, in the third quarter of 2024, compared to $2.0 billion, or 24.4%, in the third quarter of 2023. During the third quarter of 2024, gross margins decreased primarily because revenues per square foot decreased while land costs increased year over year, which was partially offset by a decrease in costs per square foot due to lower material costs as the Company continued to focus on construction cost savings.
Selling, general and administrative expenses were $601 million in the third quarter of 2024, compared to $583 million in the third quarter of 2023. As a percentage of revenues from home sales, selling, general and administrative expenses decreased to 6.7% in the third quarter of 2024, from 7.0% in the third quarter of 2023, primarily due to a decrease in broker commissions and benefits of the Company's technology efforts.
Financial Services
Operating earnings for the Financial Services segment were $144 million in the third quarter of 2024, compared to $148 million in the third quarter of 2023. The decrease in operating earnings was primarily due to lower lock volume and margin in the mortgage business, partially offset by higher volume in the title business as a result of increased deliveries year over year.
Ancillary Businesses
Operating earnings for the Multifamily segment were $79 million in the third quarter of 2024, compared to an operating loss of $9 million in the third quarter of 2023. The increase in operating earnings was due to a $179 million one-time net gain from the sale of assets in the Company's LMV Fund I, partially offset by a one-time $90 million write-down of non-core assets as the Company focuses on immediately monetizing these assets. Operating earnings for the Lennar Other segment were $20 million in the third quarter of 2024, compared to an operating loss of $26 million in the third quarter of 2023. The Lennar Other operating earnings for the third quarter of 2024 were due to mark-to-market gains on the Company's publicly traded technology investments.
Tax Rate
In the third quarter of 2024 and 2023, the Company had tax provisions of $348 million and $358 million, respectively, which resulted in an overall effective income tax rate of 23.0% and 24.4%, respectively. For both periods, the Company's effective income tax rate included state income tax expense and non-deductible executive compensation, partially offset by energy efficient home and solar tax credits.
Share Repurchases
In the third quarter of 2024, the Company repurchased 3.4 million shares of its common stock for $519 million at an average share price of $154.77.
Liquidity
At August 31, 2024, the Company had $4.0 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under its $2.2 billion revolving credit facility, thereby providing approximately $6.2 billion of available capacity.
Guidance
The following are the Company's expected results of its homebuilding and financial services activities for the fourth quarter of 2024:
New Orders
19,000 - 19,300
Deliveries
22,500 - 23,000
Average Sales Price
About $425,000
Gross Margin % on Home Sales
Flat with Q3
S,G&A as a % of Home Sales
6.7% - 6.8%
Financial Services Operating Earnings
$140 million
About Lennar
Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. Lennar builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. LENX drives Lennar's technology, innovation and strategic investments. For more information about Lennar, please visit www.lennar.com.
Note Regarding Forward-Looking Statements: Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the homebuilding market and other markets in which we participate, as well as our expected results and guidance. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which are expressly qualified in their entirety by this cautionary statement and speak only as of the date made. Important factors that could cause differences between anticipated and actual results include slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities or own a substantial number of single-family homes for rent; decreased demand for our homes, either for sale or for rent, or Multifamily rental apartments; the potential impact of inflation; the impact of increased cost of mortgage financing for homebuyers, increased interest rates or increased competition in the mortgage industry; supply shortages and increased costs related to construction materials, including lumber, and labor; cost increases related to real estate taxes and insurance; the effect of increased interest rates with regard to our funds' borrowings on the willingness of the funds to invest in new projects; reductions in the market value of our investments in public companies; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies, including our land light strategy, and our planned spin-off; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; the forfeiture of deposits related to land purchase options we decide not to exercise; the effects of public health issues such as a major epidemic or pandemic that could have a negative impact on the economy and on our businesses; possible unfavorable results in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the other risks and uncertainties described in our filings from time to time with the Securities and Exchange Commission, including those included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K filed on January 26, 2024, as amended by our Annual Report on Form 10-K/A filed on April 25, 2024 and Quarterly Reports on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
A conference call to discuss the Company's third quarter earnings will be held at 11:00 a.m. Eastern Time on Friday, September 20, 2024. The call will be broadcast live on the Internet and can be accessed through the Company's website at investors.lennar.com. If you are unable to participate in the conference call, the call will be archived at investors.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-3829 and entering 5723593 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Operating Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
Nine Months Ended
August 31,
August 31,
2024
2023
2024
2023
Revenues:
Homebuilding
$ 9,045,692
8,318,615
24,357,742
22,144,937
Financial Services
273,270
266,206
804,713
672,166
Multifamily
93,443
137,394
322,620
432,661
Lennar Other
3,637
7,388
9,489
15,419
Total revenues
$ 9,416,042
8,729,603
25,494,564
23,265,183
Homebuilding operating earnings
$ 1,477,918
1,493,820
3,846,869
3,615,068
Financial Services operating earnings
144,400
148,995
422,708
340,331
Multifamily operating earnings (loss)
78,908
(8,733)
42,795
(38,496)
Lennar Other operating earnings (loss)
20,095
(26,218)
(48,417)
(84,374)
Corporate general and administrative expenses
(164,672)
(114,144)
(478,975)
(365,002)
Charitable foundation contribution
(21,516)
(18,559)
(58,004)
(49,292)
Earnings before income taxes
1,535,133
1,475,161
3,726,976
3,418,235
Provision for income taxes
(347,859)
(358,209)
(859,195)
(824,233)
Net earnings (including net earnings attributable to noncontrolling interests)
1,187,274
1,116,952
2,867,781
2,594,002
Less: Net earnings attributable to noncontrolling interests
24,600
7,956
31,462
16,778
Net earnings attributable to Lennar
$ 1,162,674
1,108,996
2,836,319
2,577,224
Basic and diluted average shares outstanding
270,164
282,854
273,604
284,612
Basic and diluted earnings per share
$ 4.26
3.87
10.26
8.94
Supplemental information:
Interest incurred (1)
$ 29,781
46,924
100,056
146,206
EBIT (2):
Net earnings attributable to Lennar
$ 1,162,674
1,108,996
2,836,319
