Lennar Corp , the third-largest U.S. homebuilder, reported higher-than-expected quarterly earnings and affirmed its goal of profitability for the full year.
The news helped drive the company's shares up more than 1 percent, overshadowing a surprise decline in orders.
Lennar posted earnings of $39.7 million, or 21 cents a share, for the second quarter ended May 31, compared with a year-earlier loss of $125.2 million, or 76 cents per share.
Analysts had forecast break-even results, according to Thomson Reuters I/B/E/S.
A tax benefit of $11 million boosted the numbers, but Lennar would have beaten expectations without it.
We like the results and believe the shares should move up, wrote Ticonderoga Securities analyst Stephen East, noting that operating margins were higher than he thought they would be.
Orders fell 10 percent, with the entire decline occurring in May, after the federal home buyer tax credit expired, the company said in a statement.
FBN Securities analyst Joel Locker said analysts were expecting a rise of 13 percent and that the disappointing orders had pushed Lennar shares down slightly before the market opened.
This is another leg down, Locker said. June is going to be similar to May.
Revenue fell 9 percent to $814.5 million as deliveries were off 8 percent.
During the second quarter, we continued to see a housing market that was trying to stabilize, Chief Executive Officer Stuart Miller said in a statement. As expected, this stabilization was impacted by the expiration of the federal home buyer tax credit at the end of April.
Miami-based Lennar's experience in May matches the national numbers. Sales of new U.S. homes dropped a record 32.7 percent to the lowest level ever as the boost from the tax credit faded, the Commerce Department said on Wednesday.
But investors in homebuilder shares shrugged off that news as well in the belief that sales of new homes truly could not go any lower, said Credit Suisse analyst Dan Oppenheim.
Miller said demand would recover in the second half of the year on home prices that have fallen dramatically since housing's boom years and low interest rates, but Locker does not agree.
There's no job creation, he said. There's no demand for the foreseeable future unless you see job turnaround.
Shares of Lennar, which has operations in 14 states, were up 1.4 percent at $14.94 in morning trading on the New York Stock Exchange.
(Reporting by Helen Chernikoff; editing by Lisa Von Ahn and Maureen Bavdek)