Lennar Dons Rose-Colored Glasses

"We think the guidance may be difficult to achieve, as the high level of homes for sale will likely continue to pressure home prices, absent a sharp improvement in demand," Bank of America analyst Daniel Oppenheim wrote in a research note Wednesday morning.

Even if Lennar reduces construction costs and corporate overhead, the high inventory of homes for sale will continues to pressure home prices, absent a sharp improvement in demand, which will lead to lower margins, Oppenheim noted.

He maintained his 2007 earnings per share estimate of $1.90.

For its part, Lennar said on its conference call that the 2007 comments represented a "goal" and weren't guidance per se.

Lennar's optimistic target is reminiscent of when fellow homebuilder Hovnanian Enterprises(HOV) said it would record zero impairments in 2007 (after recording $336 million of charges in the fourth quarter) so long as the state of the housing market doesn't get any worse.

For its latest quarter, Lennar recorded a loss of $196 million, or $1.24 a share, reversing the year-ago profit of $581 million, or $3.54 a share. Revenue for the December quarter slipped 15% from a year earlier to $4.27 billion.

Analysts expected a loss of 81 cents a share and a top line of $4.15 billion.

The latest quarter includes write-offs of option deposits and pre-acquisition costs of $111.1 million and valuation adjustments of $382.8 million. Lennar said it posted a latest-quarter homebuilding operating loss of $319.4 million, as new orders dropped 6% from a year ago.

Lennar shares recently were up $2.27 to $51.99.

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