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Earnings Preview: The Homebuilder Lennar

NEW YORK (AP) â¿¿ Lennar Corp. is expected to post a fourth-quarter profit on Wednesday and report a slight increase in new home orders as the housing market continues to make modest improvements.

WHAT TO WATCH FOR: Industry experts and investors will be looking to see what new home orders were like in the September through November quarter. Lennar, which has operations in 17 states and sells homes for entry level and move-up buyers as well as retirees, is expected to report 2,590 new home orders for the period, according to FactSet. This would top its new home orders of 2,520 in the year-ago period.

The company's Rialto unit will also be in focus, as it has been a key element behind Lennar's profitability. The division, which buys troubled loans and properties from banks, saw its operating earnings fall to $11.7 million from $18.5 million in the third quarter but its revenue rose to $42.1 million from $38 million.

Investors will also be looking to see how much home sales cooled in the fall, as spring and summer are typically busier months for such purchases. Aside from the traditionally slower season, Lennar also continues to contend with high unemployment, larger down-payment requirements and tougher lending standards that are preventing many people from buying homes. Builders are also struggling to compete with the large number of foreclose properties on the market and to convince consumers to buy when they are waiting to see if home prices will drop further.

WHY IT MATTERS: Homebuilders are a bellwether for the housing market and the economy. While new homes represent less than one-fifth of the total housing market, construction of houses has a major impact on the economy. Each new home creates an average of three jobs and generates $90,000 in taxes, according to the National Association of Home Builders.

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