Topline
Lennar, the nation’s second-largest homebuilder, said in its third quarter earnings call Thursday that federal immigration enforcement is stripping some of its trading partners of their entire workforces, revealing the threat to its construction-cost gains as Immigration and Customs Enforcement arrests have surged.
Lennar reported third quarter earnings Thursday.
Photo by Justin Sullivan/Getty Images
Key Facts
Lennar CEO Stuart Miller said Thursday immigration enforcement is creating sporadic labor shortages in certain areas, identifying landscaping trades as an example of where, “All of a sudden, we’ve got trade partners that have no crews.”
Lennar said in its third quarter earnings statement “a decrease in the number of potential homebuyers due to increased enforcement of restrictions on immigration” could cause differences between anticipated and actual financial results in future quarters.
David Grove, Lennar’s executive vice president for homebuilding, said during Thursday’s earnings call that about 20% of Lennar’s divisions are experiencing labor pressure.
In addition to immigration enforcement, Miller also said data center construction has placed pressure on Lennar, as the energy-intensive facilities draw from the same labor pool.
Miller predicted Lennar will outperform the broader market on labor cost given its scale, but noted the company will be more subject to the movement of the market and not immune to it if overall labor availability tightens.
Big Number
$284 million. That is how much Lennar posted in net earnings for the third quarter, a significant drop from the $591 million recorded in the same period last year.
What To Watch For
Lennar expects between 19,500 and 20,500 new orders in its fourth quarter, as well as 22,000 to 23,000 deliveries. In the third quarter, the company delivered 20,840 homes and met its guidance range, though it missed guidance on new orders, which totaled 20,879—a 9% decrease from the year prior.
Tangent
Lennar shares closed up 1.7% at $79.70 on Thursday. The company’s stock is down 22% since the start of the year, when shares were priced around $104.
Key Background
Miller acknowledged in Lennar’s earnings statement it was navigating “a challenging economic environment” that “has deteriorated since our last earnings call.” Mortgage rates are up, with the 30-year rate reaching approximately 6.8% by the end of Lennar’s third quarter. Miller also said consumer confidence has fallen as increased rates and less affordability have influenced buyers to slow on their purchase decisions.
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