Lennar's loss bigger than expected
No. 1 homebuilder in terms of revenue sees sharp drop in new orders and deliveries as it cuts staff, plans more layoffs.
NEW YORK (CNNMoney.com) -- In a further sign of trouble for the battered housing and homebuilding markets, Lennar posted a much bigger-than-expected loss Tuesday for its fiscal third quarter, saying it has already slashed staff and plans further cuts.
The nation's No. 1 homebuilder in terms of revenue, Lennar posted a net loss of $513.9 million, or $3.25 per diluted share, down from the net earnings of $206.7 million, or $1.30 per diluted share, in the year-earlier period.
Analysts surveyed by earnings tracker First Call had forecast a loss of 55 cents in the period.
The builder said it delivered 7,636 homes in the period, down 41 percent from a year earlier, while new orders plunged 48 percent to 5,804. It also saw its cancellation rate rise to 32 percent of orders.
As a result of the downturn, the company announced that it had cut its work force to date by approximately 35 percent and expected continued reductions in the fourth quarter. The staff cut was mostly sales and support personnel, as the builders generally use contractors and subcontractors to actually build its homes.
"It is already well documented that the housing market has continued to deteriorate throughout our third quarter," said a statement from CEO Stuart Miller. "Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward. Consumer confidence in housing has remained low, while the mortgage market has continued to redefine itself, creating higher cancellation rates."
Miller's statement suggested that the company may have to cut prices further, as he said, "Our response to, and primary focus in, this environment continues to be to adjust pricing to meet current market conditions in order to keep inventories low and to keep our balance sheet positioned for the future."
A further look at weakness in the housing market is due at 10 a.m. ET Tuesday, when the National Association of Realtors is due to report on existing home sales.
Economists surveyed by Briefing.com are looking for a slowdown to an annual pace of 5.5 million homes in August from 5.8 million in July. Home prices could also take a hit as problems in mortgage and credit markets limited buyers' ability to get financing.
And Thursday the government report on new home sales is expected to show the pace of sales in August fell to 825,000 from 870,000 in July, which would be a seven-year low in the pace of sales.
The problems in homebuilding are not unique to Lennar. No. 5 KB Home (Charts, Fortune 500) is forecast to report a loss Thursday. No. 2 homebuilder D.R. Horton (Charts, Fortune 500) and No. 3 Centex (Charts, Fortune 500) both reported losses far bigger than Wall Street had expected, while No. 6 Pulte Homes (Charts, Fortune 500) and Hovnanian Enterprises (Charts, Fortune 500) have reported losses for the last two quarters and analysts project losses for at least the next year.