Lennar (LEN 52.02, +0.61, +1.2%) is up after the company beat earnings and revenue expectations for Q2.
The homebuilder reported above-consensus EPS of $1.30 on a 1.9% yr/yr increase in revenue to $5.56 bln, which was also ahead of expectations.
Homebuilders like Lennar have spent the first half of 2019 rebounding from their December lows. The rebound has been assisted by falling mortgage rates and rising expectations for rate cuts from the Federal Reserve, but the industry group has only reclaimed roughly half of its losses from 2018. The iShares Dow Jones U.S. Home Construction ETF (ITB 38.25, +0.15, +0.4%) is up 27.5% so far in 2019, but it has another 21.6% to go before returning to last year's high.
While falling mortgage rates have been a supportive factor for the housing market, their impact has been limited. According to today's report from the Census Bureau, new home sales decreased to a seasonally adjusted annualized rate of 626,000 in May (Briefing.com consensus 683,000) from a revised rate of 679,000 reported in April. Including today's release, new home sales have missed expectations in three out of the first five months of 2019.
Lennar's Q2 results were driven by solid growth in deliveries while prices decreased, serving as a reminder of the difficulty of the market. Unit deliveries increased 5.2% yr/yr to 12,729 while the total dollar value of deliveries grew 3.9% yr/yr to $5.19 bln. The average sales price of delivered homes decreased 1.5% to $407,000. Sales incentives made up 6.1% of home sales revenue, up from 5.8% one year ago.
Lennar's better than expected Q2 results have lifted peers like DR Horton (DHI 44.60, +0.32, +0.7%), KB Home (KBH 24.70, +0.23, +0.9%), and PulteGroup (PHM 32.40, +0.25, +0.8%), but gains in these names have been limited due to the understanding that prices of new homes are facing downward pressure even though mortgage rates decreased in recent months.