By Ankit Ajmera
(Reuters) - Lennar Corp, the second-largest U.S. homebuilder by the number of homes sold, reported its first fall in quarterly margins in three years and forecast a further drop in 2015 as costs rise.
The warning overshadowed a 50 percent jump in quarterly profit and pushed Lennar's shares down as much as 4.3 percent in morning trading on Thursday.
Shares of other homebuilder stocks were also down. D.R. Horton Inc was down 4 percent, while PulteGroup Inc fell 2.4 percent.
Lennar joined smaller rival KB Home in forecasting a drop in margins in 2015 due to higher labor and land costs - an indication that homebuilders could be forced to raise prices further.
Lennar said its gross margin fell to 25.6 percent in the fourth quarter ended Nov. 30 from 26.8 percent a year earlier. The company did not give a precise forecast for 2015.
Chief Executive Stuart Miller said he remained optimistic about the housing recovery, citing falling gasoline prices, low interest rates and the Federal Housing Administration's decision to cut premiums.
Lennar has so far been able to raise prices despite a choppy recovery in the U.S. housing market as it mainly caters to buyers looking to upgrade to a bigger home. Such buyers are generally not affected much by volatile interest rates.
The company also accumulated land with a string of low-cost purchases during the 2008-2010 economic downturn, giving it an edge over competitors.
The company earned $1.07 a share in the fourth quarter, trumping the average analyst estimate of 96 cents per share, according to Thomson Reuters I/B/E/S.
Total revenue rose about 35 percent to $2.58 billion, largely in line with the average estimate of $2.59 billion.
The company said new orders, a key indicator of future revenue for homebuilders, rose 22 percent in the fourth quarter ended Nov. 30.
Applications for U.S. home mortgages surged by the most in more than six years last week as 30-year mortgage rates dropped below 4 percent for the first time since May 2013, the Mortgage Bankers Association said on Wednesday.
Shares of the company were down 2.6 percent at $44.57 on the New York Stock Exchange.
Up to Wednesday's close, the company's stock had risen about 20 percent in the past 12 months, compared with a 12 percent rise in the Dow Jones Home Construction Index.
(Writing by Sweta Singh; Editing by Saumyadeb Chakrabarty)
