Trump-Fueled Optimism Driving U.S. Homebuilding, Lennar Says
Lennar (NYSE:LEN), the second-largest homebuilder in the U.S., said Tuesday the election of President Donald Trump has sparked a surge in construction activity.
The Miami-based company reported a higher profit than expected for its fiscal first quarter, as homebuilding went from “slow and steady” to a faster-than-expected sales pace. CEO Stuart Miller said business accelerated amid growing confidence in the U.S. economy, which has been tied to the Trump administration’s policy agenda.
Lennar’s first-quarter results “were supported by an improving macroeconomic environment following last year's election,” Stuart said in a statement. “Since November we have seen a combination of renewed optimism, wage and job growth, and consumer confidence.”
During a conference call with analysts, Stuart added that there’s “clearly a sense of general optimism.” Builders and consumers are acting on the perception that jobs are being created, and the government has taken a more business-friendly posture, he said.
The recovery in the U.S. housing market has lifted homebuilders such as Lennar. More recently, President Trump’s calls for tax cuts and a $1 trillion infrastructure bill have injected more optimism into the real-estate industry. Since the election, shares of Lennar are up 23.9% compared to a 10.1% gain for the broader S&P 500. D.R. Horton (NYSE:DHI), the largest U.S. homebuilder, has climbed 18.8%.
According to recent Commerce Department data, U.S. homebuilding jumped in February, getting a further boost from unseasonably warm weather, as the construction of single-family houses surged 6.5% to a pace of 872,000 units, the highest level since October 2007.
And the National Association of Home Builders’ optimism index hit a 12-year high in March, rising to 71, its highest reading since 2005.
Also, Miller noted that rising mortgage rates, a potential headwind for homebuilders, have actually encouraged consumers to “get off the fence” and purchase a home.
Lennar sold 5,453 homes during the most recent quarter, up from 4,832 units a year ago. Average selling prices were flat at $365,000.
Earnings dropped 9.2% to $130.8 million, or 56 cents a share. However, adjusted earnings of 59 cents a share beat Wall Street’s estimate of 55 cents.
Revenue totaled $2.34 billion, a 17.6% increase and better than expectations for $2.19 billion.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| DHI | D.R. HORTON INC. | 169.44 | +0.74 | +0.44% |
| LEN | LENNAR CORP. | 174.14 | +0.79 | +0.46% |
| TOL | TOLL BROTHERS INC. | 164.75 | +0.56 | +0.34% |