Lennar warns on earnings

NEW YORK (CNNMoney.com) -- Lennar, one of the nation's largest home builders, warned that it will miss fourth quarter earnings forecasts and post a net loss as it writes down the value of some of its land and other assets.

Lennar (Charts) also said it has "not yet seen tangible evidence of a market recovery." And it announced it would sell much of its interest in a joint venture known as LandSource, which owns a major amount of undeveloped property near Los Angeles.

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The ongoing weakness in the home building market will cause Lennar to take a pretax impairment charges of $400 million to $500 million due to the revaluation of some of its assets.

The company says it now expects to earn between 70 to 75 cents a share in the fiscal fourth quarter, completed Nov. 30, excluding valuation adjustments and write-offs. Analysts surveyed by Briefing.com had forecast EPS of $1.07.

The company had already issued a warnings on the period in late September, when it said it expected to earn $1.00 to $1.30, rather than the $1.60 a share that was the forecast at that time.

Including those value adjustments and write-offs, Lennar said it will post a net loss per share between 88 cents to $1.28, compared to the net income of $3.54 a share a year earlier.

"While we are hopeful that low interest rates, strong employment and a healthy economy will help stimulate a recovery in 2007, we have continued to focus on strengthening our balance sheet by delivering our backlog, selling inventory aggressively and renegotiating our land positions," said a statement from CEO Stuart Miller.

The company announced that MW Housing Partners, had agreed to buy a 62 percent stake in the LandSource joint venture, which Lennar had previously been in a 50-50 partnership with LNR Property Corporation, a unit of private equity firm Cerberus Capital Management. MW Housing is co-managed by MacFarlane Partners and includes the California Public Employees' Retirement System, also known as Calpers.

MW will pay $900 million in cash and property for its stake in LandSource, which has a book value of $1.3 billion. LandSource holdings include 15,000 acres of land in the rapidly growing Santa Clarita Valley, approximately 30 miles north of downtown Los Angeles. With 23,000 residential home sites, it owns some of the last remaining large, undeveloped, but entitled, land in the greater Los Angeles area, according to a joint statement on the sale.

Lennar will record a $500 million profit on its ownership stake in the joint venture, with $125 million will be recognized at closing and approximately $375 million will be deferred over future years. It will also retain options to purchase those home sites at the market price in the future.

Lennar is not the only home builder hit by the slump in housing. In the last few months, Pulte Homes (Charts), Centex (Charts) and Toll Brothers (Charts) have all given earnings guidance below consensus forecasts, and analysts are forecasting continued earnings declines at KB Home (Charts) and D.R. Horton (Charts).

But a government report last week on new home sales showed stronger than expected sales pace and a gain in median prices in November.

New home sales: Back from the dead?