Lennar Returns to Profitability in Third-Quarter 2010; Stock Jumps 8%

This morning Lennar Corporation (LEN) released their financial results for the third-quarter ending August 31, 2010. The company posted profit of $0.16 per share compared to a loss of $0.97 per share in the same period last year. Positive highlights include an increase in home deliveries year-over-year, higher average sales prices and lower homebuyer incentives. Deliveries were driven by the Eastern region, with other regions recording flat to slightly lower performances year-over-year. The stock surged as the results beat Analyst’s expectations in spite of the expiration of the homebuyer tax-credit earlier this year; however, this surge may also be exacerbated by traders covering their short positions. In addition, the stock continued to surge post the release of the Homebuilders’ Confidence Index, which held steady at 13 month-over-month.

Despite these results, our view of the housing market remains negative due to the supply situation; especially since the most recent existing home sales numbers released by the National Association of Realtors showed the largest month-over-month drop in July. In addition, we are holding to our thesis that housing will continue to be restrained by high unemployment.

Figure 1
LEN Share Performance

September 20, 2010 (Intraday)

Lennar Stock Performance

Source: MarketWatch, Inc.

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