Lennar ups profit view, calms investors

NEW YORK (Reuters) - Home builder Lennar Corp. on Wednesday said third-quarter earnings would exceed Wall Street estimates, with orders for new homes remaining strong even as concerns rippled through the stock market about how long the boom can continue.

Lennar said third-quarter earnings would exceed $2 per share, and it expects to raise its 2005 earnings forecast when it reports the third-quarter results next week. Wall Street analysts, on average, expected profit of $1.93 per share for the quarter and $7.86 for the year, according to Reuters Estimates.

"While we generally don't preannounce our quarterly results, given yesterday's market volatility and given the fact that our Miami corporate office was closed and management was inaccessible because of Hurricane Rita, we felt it prudent to preannounce our third quarter results," Chief Executive Stuart Miller said in a statement.

Shares of Lennar and other home builders fell across the board Tuesday after the U.S. Federal Reserve raised interest rates for the 11th time in a row and signaled that its campaign of raising rates to combat inflationary pressures would continue unabated.

Home building stocks have risen sharply for more than two years as low interest rates broadened consumer borrowing power, driving demand for new homes. But persistent warnings from Federal Reserve Chairman Alan Greenspan that the housing market is showing signs of frothiness and the Fed's insistence on raising short-term rates have fueled concern that the new home building binge is nearing an end.

Still, rates on the 10-year Treasury, which guide mortgage rates, have remained stubbornly low. On Wednesday, the Mortgage Bankers Association, wan industry trade group, said the average rate of a 30-year mortgage was 5.81 percent last week.

On Tuesday, the government reported new housing starts slid in August by a larger-than-expected 1.3 percent, although ground breaking on single-family homes showed a modest increase.

In pre-market open activity shares of Lennar traded at $55.69 on the Inet brokerage system, up from its Tuesday close of $54.10 on the New York Stock Exchange, when Lennar shares fell about 8 percent and the broader housing index the Dow Jones U.S. Home Construction Index , fell to its lowest point in nearly a year.

Lennar said its business continued to surge. Deliveries of new homes will exceed 10,900 in the quarter, up from its previously announced estimate of 10,800 homes. Further, home building gross margin will exceed 26 percent, more than 300 basis points higher than last year.

Net new orders will rise more than 20 percent from the prior year, it said.

(Additional reporting by Ilaina Jonas)

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