Lennar Corporation (NYSE:LEN) Q2 2019 Earnings Conference Call Transcript

Jun 25, 2019 • 11:00 am ET

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Lennar Corporation (NYSE:LEN) Q2 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

We will now begin the question-and-answer session. (Operator Instructions) Our first question coming from the line of Mike Rehaut of JP Morgan. Your line is open.

Analyst
Michael Rehaut

Thanks. Good morning everyone, and congrats on the results. First question, you know, just on the housing market and some of the commentary that you gave earlier on in your prepared remarks, specifically talking about the housing market strengthening during the second quarter, you highlighted traffic and sales. And I believe even if I heard you right, incentives declining, but I just wanted to get a little bit more granular in terms of the order trends, if possible, how they progressed during the quarter. Obviously, they came in a little bit above your guidance. And any commentary around June as well, particularly as it relates to any possible early impact from the recent -- further decline in rates?

Executive
Stuart Miller

Yeah. So Mike, I think that -- what we highlighted in the call, is that the market had really continued the trend that we saw in the first quarter. There had been a progressive improvement through the quarter though fairly mild and I was clear to say that the market rather than being robust could be qualified as solid and it really did solidify through the quarter and I think that's what you're seeing play through our numbers. Rick, you want to add to that?

Executive
Rick Beckwitt

Yes. And if I had to give you sort of trajectory in the quarter, May was the strongest month from -- for us from both the new sales order, from an absorption paid standpoint and from just an overall field of traffic and buyer sentiment. Incentives were down quite a bit from our fourth quarter, with regard to the incentive in the sales order and that's what gives us a little bit confidence that you'll start to see some margin improvement in the back half of the year combined with the construction cost stuff that Jon highlighted.

Analyst
Michael Rehaut

That's great. Thank you, Stuart and Rick on that. I guess secondly just to highlight or talk a little bit more about the incentive trends, specifically the gross margins, you kind of highlighted that the increase if I heard it right, that the sequential increase in incentives on closings is still more of a flow-through from the softness in the fourth quarter. I wanted to be sure that that was fully the case in that as you're saying, maybe we could just shift the attention little more towards if you have any stats around incentives on orders. And you kind of been saying that they're down materially from the fourth quarter. I was curious on the cadence -- the continued cadence, if there is any improvement in incentives on 2Q orders versus 1Q, because I think that's an area of focus right now as it relates to -- if the market continues to strengthen as you talk about? If the pricing is further improved 2Q versus 1Q?

Executive
Stuart Miller

Yes. That's what I was trying to address.