Lennar Says Profit Dropped on Incentives to Buyers
Lennar Corp., the second-largest U.S. homebuilder by market value, said profit fell in the fiscal third quarter, the first decline in six years, after a slump in demand forced the company to offer buyers incentives... The builder's preliminary net new orders fell 5 percent, less than competitors KB Homes or Beazer Homes Inc., which this week reported declines of more than 40 percent. Homebuilders such as Lennar and industry leader Pulte Homes Inc. are seeing profit margins erode as they offer incentives such as stainless steel appliances and hardwood floors to lure buyers.

Lennar Says Profit Dropped on Incentives to Buyers
By Kathleen M. Howley and Peter Woodifield

Sept. 8 (Bloomberg) -- Lennar Corp., the second-largest U.S. homebuilder by market value, said profit fell in the fiscal third quarter, the first decline in six years, after a slump in demand forced the company to offer buyers incentives.

Earnings for the three months ended Aug. 31 amounted to $1.25 to $1.35 a share, down from $2.06 a year earlier, the Miami-based company said today in a statement. The builder's preliminary net new orders fell 5 percent, less than competitors KB Homes or Beazer Homes Inc., which this week reported declines of more than 40 percent.

Homebuilders such as Lennar and industry leader Pulte Homes Inc. are seeing profit margins erode as they offer incentives such as stainless steel appliances and hardwood floors to lure buyers. Lennar's previous earnings estimate per share for the fiscal third quarter was $1.90 to $1.95.

``The U.S. housing market has continued to deteriorate,'' Chief Executive Officer Stuart Miller said in the statement. ``Increased sales incentives, along with certain land adjustments, were the primary factors in lowering our earnings per share estimate.''

End of Boom

Across the U.S., the median price of new homes probably will rise 0.2 percent on an annualized basis in 2006, the worst performance since prices fell in 1991, National Association of Realtors chief economist David Lereah said yesterday.

Lennar is the third U.S. homebuilder to reduce its forecast this week as the five-year housing market boom comes to an end. Beazer Homes USA Inc. and KB Home slashed their estimates for fiscal 2006 because of a slump in demand for new houses.

The ``difficult'' market has prompted Lennar to restrict its land purchases and keep its inventory to a minimum, according to the statement. The company has a ``materially lower'' debt to total capital ratio from a year earlier.

In June, Lennar reduced its full-year forecast to a range of $8 to $8.25 a share, compared with $8.21 in 2005.

KB Home, the sixth-largest U.S. homebuilder, on Wednesday predicted earnings of $8 to $8.50 a share for fiscal 2006, down from a previous projection of $10. Beazer yesterday reduced its earnings forecast for the year by as much as 18 percent, saying revenue had fallen by half in the past two months and cancellations had doubled as higher rates depress demand.

Lennar's shares fell 25 cents to $43.25 yesterday, valuing the company at $6.8 billion. The stock has slumped 29 percent this year, less than the 35 percent drop in the Standard & Poor's Supercomposite Index.

To contact the reporters for this story: Peter Woodifield in Edinburgh at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or Brian Louis in Chicago at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

Last Updated: September 8, 2006 09:28 EDT
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