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Homebuilder Lennar misses earnings, shares dip

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Yahoo Finance Live's Brian Sozzi and Julie Hyman break down homebuilder and developer Lennar's earnings miss.

Video Transcript

JULIE HYMAN: Well, we're just a few minutes away from the opening bell. Wanted to bring you a big mover that we're watching ahead of the bell And that is Lennar, the home builder. And Sozz, this report is so interesting to me because on the one hand, we have a report this morning that, overall, we are seeing housing starts that climbed, what, 11.8% last month on a month over month basis, building permits up 3.6%. And then you have Lennar, which is down 4.5%.

Now, the company has been growing, right? And if you look at the revenue last quarter, it was up 24%. New orders at over 15,000. But it's this current quarter that is problematic. The company says new orders will be 14,800 to 15,100, that's below estimates. The upper end of that is even below estimates. And the company is blaming supply chain here.

So again, there are sort of echoes of the Zillow situation a little bit to me in that the demand is there, they want to be building the houses, but they say, the shortages are preventing them from doing. So I don't know. I don't know what you do to manage around that at this point.

BRIAN SOZZI: Yeah. Cry me a river Lennar. I think this is what we have continued to hear from this company the past two quarters here and many other homebuilders. They want to build their homes. They just can't find the labor. The materials are a lot higher than they were last year here. But all in all, I mean, this is not a bad quarter, Julie, to your point, revenues up 24%. New orders were light, I believe, only up 2%. Don't think like market likes that, especially considering our shares were up 45% year to date before this whooping. They're getting here in the pre-market. Backlog up 26%.

But overall, the takeaways here, they can't build homes fast enough. And now, perhaps, consumers are realizing that and maybe they're staying in the homes they already own. Also, in addition to the inflation we are seeing on new home prices here, it's expensive, so perhaps people just waiting on the sidelines.

JULIE HYMAN: Yeah. And the company is by the way charging more. Their prices on homes going higher. So that's something that presumably would benefit margins going forward but not benefiting them enough if people want to see them building more houses. But gross margin, by the way, last quarter on home sales, 28%. That's up 3 basis points year over year and in line with estimates.

And so as we look at that, we have to wonder what is going to happen on the supply front in the new year. And are we going to continue to see on a broader level in just Lennar? Are we going to continue to see those home prices trend higher? What is that going to mean for affordability? What is that going to mean for housing sales going into next year?

One of the lagging components of inflation that we've been talking a lot about is housing costs. And that's something that has not caught up with the rest. And it's something that economists, many economists, are saying we are going to see housing costs, both for rent and purchases, be a persistent factor in inflation going into next year and potentially, a worrisome one. So that's something that we should definitely keep an eye on.