Lennar Corporation (NYSE:LEN) Q1 2024 Earnings Call Transcript March 14, 2024

Lennar Corporation isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to Lennar's First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to David Collins for the reading of the forward-looking statement.

David Collins: Thank you, and good morning, everyone. Today's conference call may include forward-looking statements, including statements regarding Lennar's business, financial condition, results of operations, cash flows, strategies and prospects. Forward-looking statements represent only Lennar's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

These factors include those described in our earnings release and our SEC filings, including those under the caption Risk Factors contained in Lennar's annual report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

Operator: I would like to introduce your host, Mr. Stuart Miller, Executive Chairman and Co-CEO. Sir, you may begin.

Stuart Miller: Very good. Good morning, everybody, and thank you for joining us today. I'm in Miami today, together with Jon Jaffe, our Co-CEO and President; Diane Bessette, our Chief Financial Officer; David Collins, who you just heard from, our Controller and Vice President; Bruce Gross, our CEO of Lennar Financial Services and a few others are here with us as well. And as usual, I'm going to give a macro and strategic overview of the company. After my introductory remarks, Jon is going to give an operational overview, updating construction cost, cycle time and some of our land strategy and position. As usual, Diane is going to give a detailed financial highlight along with some limited guidance for the second quarter and full year 2024.

And then, of course, we'll have our Q&A session. As usual I'd like to ask that you please limit yourself to one question and one follow up, so that we can accommodate as many as possible. So let's go ahead and begin. We're very pleased to report another very solid and consistent quarter of operating results for Lennar. We've continued to execute our operating plan effectively into the first quarter driving excellent operating results, and we have simply never been better positioned from balance sheet to execution to operating strategy to address market conditions as they unfold for the remainder of 2024 and beyond. In the first quarter, we started 18,338 homes, we sold 18,176 homes, and we delivered 16,798 homes. While we expect deliveries for the year to be approximately 10% higher than last year at 80,000 homes.

Next quarter, we expect to start approximately 21,000 homes, sell approximately 21,000 homes and deliver between 19,000 to 19,500 homes. Admittedly, we aren't quite there yet, but we are getting closer and closer to an even flow manufacturing model that we believe will continue to enhance our cash flow, our bottom line as well as our predictability. Last year, we grew at a 10% pace in a very difficult year, and we believe we'll grow at a 10% pace again this year in a complicated economic conditions. And it is being done by a carefully designed program to maintain volume, maximize efficiencies and cost reductions around production, maintaining even flow of production and sales and rebuild our asset base and balance sheet in order to drive cash flow, effective capital allocation and higher returns.

That is total shareholder returns, returns on assets and returns on equity. I know I didn't mention margin yet. That's because, as I've said before, margin is the springing mechanism that enables all of this to happen. This quarter, our margin was 21.8%, somewhat higher than expected. And next quarter, we expect our margin to be approximately 22.5%, depending on market conditions. And for the full year, we expect margin to be approximately the same as last year's full year margin of 23.3%, but that, of course, will depend on market conditions as well, we will see. Additionally, we've continued to drive strong cash flow and allocate over $500 million to repurchase 3.4 million shares of stock and improve our balance sheet with a homebuilding debt to total capital ratio of under 10%.

While we know we have accumulated a sizable $5 billion of cash on our book, we are crafting our strategy for appropriate capital allocation. Overall, the macroeconomic environment remains relatively strong for the new homebuilders. The general theme remains primarily focused around very strong demand for housing, limited by the chronic housing shortage that is particularly problematic for working class families, and their ability to find affordable or attainable supply. Demand for that product remains robust if it can be built at an attainable price point. The economic environment driving demand has been relatively favorable, supported by low unemployment and fairly strong consumer confidence. Generally speaking, consumers remain employed. They are confident that they will remain employed and they believe that their compensation is likely to rise.

This is most often the foundation of a very strong housing market. Along with the supply shortage, the additional limiting factor continues to center around affordability driven by the impact of higher interest rates and stubborn inflation. With higher interest rates, affordability continues to be tested as higher monthly payments make qualifying for a loan increasingly difficult. At the same time, inflationary pressures have driven traditional cost of living expenses higher over the past two years, which has made savings for a down payment increasingly difficult. Higher prices have also started to lead to increased personal and credit card debt as families stretch to pay their bills. We've started to see early evidence of debt delinquencies showing up and derailing some mortgage applications.

While interest rates have continued to move higher and lower, as the Fed continues to seek economic data indicating that inflation has been controlled, the consumer has been navigating an affordability gauntlet. The new homebuilders have worked out a variety of incentive structures that range from interest rate buy downs, to closing cost pickups, to price reductions, all designed to meet the purchaser at the intersection of need and affordability. Those incentives have increased and decreased as interest rates have moved up and down, homebuilders have been uniquely able to capture demand by using these incentives to unlock the affordability constraints and enable purchasers to transact. Against this backdrop in our first quarter we've been focused on and consistent in executing our core operating strategies.

We continue to migrate to a pure-play manufacturing model across our homebuilding platform and each of our 40 homebuilding divisions in order to reduce production costs while we generate consistent cash flow. Additionally, we are reengineering our products for efficiency and volume in order to enhance our inventory turn and grow volume to contribute to build a balanced and therefore a healthier overall housing market. We have also continued to migrate to a land light balance sheet while we grow our business and expand market share in order to drive total shareholder return, return on inventory and return on equity. We are, so to speak, continuing to modernize and upgrade the Lennar airplane while we are flying the plane and putting execution and safety first as we fly.

It has been a busy and productive quarter for Lennar and we've continued to execute in the short term while we continue to build our platform for continued and future success. So, let me break some of this down. On the operational side, we are running under a by design operational model, where we are starting homes at a pace designed to increase market share, while we maximize logistics and efficiencies in order to benefit from reduced construction costs. Our trade partners are given visibility on starts and timing expectations so that they can be more efficient and help pass efficiency savings on to our customers through more affordable product. By driving volume, we gained market share in most of our core markets, as we lean in when others pull back.

Our trade partners see a consistent and dependable partner that is worthy of the designation of builder of choice. We work side by side with our trade partners, while we attract additional trade partner relationships. Participants find that they have dependable and consistent work with our production strategy, which leads to higher productivity and therefore, cost savings. Through market share growth in local markets, we enhanced the ability to better manage our costs, enhance our efficiency of operations, reduce cycle times with efficient production templates and enhance our inventory turn. Jon will discuss this in more detail in just a few minutes. Driving our confidence to start homes at pace in order to achieve maximum efficiency in the field is the Lennar Machine.

The Machine is a combined program of digital marketing, sales consultant engagement and dynamic pricing. We've described the machine in prior calls, and many of you have now come to our office to see it in action. The machine has completely changed the manner in which we sell homes and enables us to drive maximum efficient production. If we build a home, we sell that home. We sell by digitally acquiring leads through our digital marketing programs, then we filter those leads, so the best leads go directly to our sales professionals. They nurture those best leads for customers while our dynamic pricing model assists in dynamically tailoring pricing in real-time to meet the market, given consumer desires, market conditions and competitive factors.

The dynamically adjusted pricing using incentives or price alterations automatically adjust our margin up or down while we maintain production and sales base. We set the production to efficiency. We match sales pace to production, and we deliver the homes we build while we carefully maintain controlled inventory levels, all while reducing production costs and driving consistent cash flow. I know it all sounds easy, but it's not. But this has been a core pillar of the programming that we've been reworking over the past years, and it's really starting to kick in and work quite well. Next to our laser focus on volume with production and sales being an even better alignment, we are intensifying our focus on producing affordable and attainable product across our platform.

We've recognized that the chronic housing shortage is a critical issue, and it's more than just a great talking point. The reality is that our industry needs to find solutions to building a healthier housing market that is attainable to participants across the economic landscape. Working-class housing is essential to the effective working of our cities across the country, and we hear that from mayors and governors everywhere. So we've been working on using our strategies for production and cost efficiencies to help build a healthier housing market that is accessible to everyone. Of course, it all starts with lower production costs across our platform. Land, we know is getting more expensive, impact fees also are getting more expensive and labor costs have been rising as well.

We can only reduce our input costs by increasing productivity to efficiencies of our operations. Our focus has been on doing just that. We are building more consistent products that we call our core products that are carefully value-engineered, and we are using our start pace to enable an engineered production cycle as well enabling us to reduce cycle time and to work with our trade partners to build efficiencies in logistics and the way that we run our community production. We've also continued working on additional product approaches to help build a healthier housing market. We've intensified our focus on build-to-rent that is community scale and single-family for-rent, scattered home sale markets, we believe that we can and need to build additional production for professionally owned housing that can fill an important need.

Those professional purchasers need cost efficiencies in today's interest rate environment in order to make their rents attainable and we can provide that. There are families who are building their future and aspire to single-family lifestyle with backyards and schools and parks but who can't yet afford a down payment or don't have the credit characteristics to qualify the mortgage that they need. Institutional buyers are filling that void for those families. Many across the industry have criticized the professionally owned market and the investor class that competes with primary homeowners to purchase product for rentals. This is flawed thinking. Those investors are actually filling a critical need for the underserved families who seek to bridge the lifestyle for their family while they build the down payment and credit score to ultimately achieve homeownership.

This is the critical equitable side of home production, and the institutional buyers are not competitors to the primary buyers, they are additive to the valuable housing stock, enabling those who don't have a family that can help them achieve the lifestyle they want while they build their capital capacity. We are working across our platform with our institutional partners to produce more structured programs to provide more housing for those who need professional ownership as a stepping stone for the ultimate home of their own. We are also engaging our blue chip multifamily platform to build attainable rental product in an off-balance sheet configuration. We have a strong history of successfully building multifamily product across the country.

We have been building those products in an off-balance sheet configuration, and we expect to continue to build this vital attainable product without encumbering our balance sheet. Finally, we have built and continued to refine our land strategy by design as well in order to dovetail with our production orientation. Every home that is going to be built needs a home site with a permit, and those home sites need to be optioned and off balance sheet until we're ready to build. We continue to focus on a just-in-time delivery program for land, just like we have for lumber and appliances and other products, and we continue to make excellent progress in this regard. We accomplished this by both negotiating option deals with landowners and developers.

And we also – and also creating structured land bank strategies often with private equity capital. By consistently focusing on our land-light strategy, we've materially enhanced and generated consistent cash flow through the ups and downs of interest rate changes and we've enhanced our balance sheet and our liquidity even after redeeming debt and purchasing stock over the past years, along with purchasing $500 million of shares of stock through this quarter. Our balance sheet is situated today with a 9.6% homebuilding debt-to-total cap ratio with $5 billion of cash on hand and $0 drawn on our revolver and with an expected $3.5 billion plus or minus of net cash flow over this next year. Accordingly, we have the flexibility to allocate capital strategically first of course to grow while also retiring debt, paying appropriate dividends and repurchasing shares of Lennar stock.

Accordingly, this quarter, we raised our dividend to $2 per share and authorized an additional $5 billion of stock repurchases as we continue to drive total shareholder returns. Even with these capital allocations, many have suggested that given the tremendous success of our migration to our land-light program, we have accumulated too much cash on our balance sheet, which limits the ability of our returns to move higher. While we have understood the concern, we have remained patient as we have evolved not just the migration to the land-light configuration, but also have remained focused on the long-term durability of the land bank structures involved. Private equity capital can be fickle. By driving volume through these programs, we have gained advantaged insights into and refined the workings of our strategic land banks.

The underlying plumbing systems for the land banks has been refined and questions have now been answered as to the durability of the capital partners that make up the counterparty, [Technical Difficulty] namely us. Our consistent volume helped to find both trust and dependability and has taken those relationships to another level as we either party flinched as market conditions tested the boundaries of relationships. While adjustments were made and lessons were learned, the structures and relationships became stronger and more durable. Accordingly, we have now rekindled our focus on a strategic spin-off that can be cleanly focused on fortifying durable land strategy. By spinning our own land, excess land in a taxable spin, we believe that we can create an additional though with permanent capital vehicle that can option develop home sites to Lennar and recycle capital into new home site, while distributing market appropriate returns to shareholders.

We have stood up a strong land vehicle that is under consideration, currently, with about $4 billion of land, it could be more, could be less, and it is under development and consideration right now. Such a transaction would distribute capital to shareholders, it would reduce inventory on Lennar's books, and it would provide permanent dependable capital for future land options. Our balance sheet would remain very strong with consistent earnings and cash flow to contribute to pay down debt and continue to repurchase stock. We know we've had a false start on a prior spin concept and there's no promise of certainty or completion on this program. But on the positive side, our Chief Operating Officer, Fred Rothman is singularly focused on this initiative and Fred likes to get things done.

We'll keep you apprised of progress but progress should happen relatively quickly as this transaction is far simpler in structure. With that said, let me conclude by saying that our first quarter of 2024 has been another strategic and operational success for our company. While market conditions have remained challenging, we have consistently learned and found ways to address market needs. We know that demand is strong and there is a chronic housing supply shortage that needs to be filled. We will continue to drive production to meet the housing shortage that we know persists across market. With that said, as interest rates subside and normalize, and if the Fed is going to begin to actually cut rates, we believe that pent-up demand will be activated and we will be well-positioned and well prepared.

If not, we will continue to produce volume and increase market share. To date, we have seen overall market conditions remain generally constructive for the industry. Even though higher interest rates have remained sticky, strong pent-up demand has found ways to access the housing market. Given consistent execution, we are extremely well-positioned for even greater successes as strong demand for affordable offering continues to seek short supply. Perhaps most importantly, our extraordinarily strong balance sheet affords us flexibility and opportunity to consider and execute upon thoughtful innovation for our future. We have the luxury in the short-term while we continuously in the short-term shareholders through dividend and stock buyback, while we also, and I emphasize the word also pursue strategic distribution to shareholders that fortifies our future as well.

We have clearly earned an enviable position. As we look ahead to a successful 2024, we are well-positioned for and expect to see much more of the same. We are confident that by design, we will continue to grow to perform and to drive Lennar to new levels of consistent and predictable performance. We are guiding to 19,000 to 19,500 closings next quarter with approximately a 22.5% margin and we expect to deliver approximately 80,000 homes this year with a little over 23% margin. We also expect to repurchase in excess of $2 billion of stock as we continue to drive very strong cash flow. We look forward to a very strong year and for that I want to thank the extraordinary associates of Lennar for their tremendous focus, effort and talent. And with that, let me turn over to Jon.

Jon Jaffe: Good morning. As you heard from Stuart, our operational teams at Lennar continue the execution of our core operating strategies in our first quarter. The focus starts with Lennar marketing and sales machine every quarter, our divisions continuously learn from their engagement with Lennar Machine, gain knowledge in how to use this information for decision making, provide feedback for enhancements and improve the machine and execution of our strategies. This continuous loop of learnings and improvements drive the wide [ph] analytics, which enable us to improve our matching of sales to our production pace. You can see the evolution of this improvement in our operating results as sales were evenly matched with starts in the first quarter and are projected to be evenly matched again in the second quarter.

While there’s more progress to be made, this matching of sales and production is leveling out our closings from quarter-to-quarter. The goal is even flow deliveries where by design starts gradually increase quarter-over-quarter to ultimately provide a consistent number of deliveries throughout the year. This operating model produces the most significant of all the efficiencies that benefit our trade partners. To optimize the pricing of each home, this strategy is more than just about selling about the pace of sales, but about selling the right homes at the right price. In every division, Mondays are now referred to as machine Mondays. Our operating teams gather to review dashboards informing them of the prior week’s results compared to the planned activity.

This analysis of the prior week’s activity from digital marketing leads to sales pace and price of homes sold is evaluated to see if we sold the right homes. Thus informing our decision making and we plotted course of action for the current week. As the week unfolds, this is reevaluated to make adjustments. All of this analysis enables each division to make ongoing adjustments matching sales to unsold production as homes progress towards completion. In our first quarter, as interest rates fluctuated, this process informed us as to where we have pricing power or where we need buy down of interest rates and/or other incentives to maintain the desired pace. The confidence we have in this by design sales strategy allows us to maintain consistent starts.

These starts lead to increased market share. This has seen our growth of 28% in sales and 23% in deliveries year-over-year as our consistent starts have filled the void of other builders who pulled back. This consistency of starts and related share gain have positioned Lennar with a number one or two market share in 33 of our 40 operating divisions with 23 of these 33 divisions having the number one market share. Here are some examples of our markets where we have both the leading market share position and also have increased that share. In the Carolinas, market share in Raleigh improved to 20% up from 16% and Charleston at 24% up from 22%. In the Midwest, our market share in Indianapolis is up 7% to 34%, Minnesota is up 4% to 29% and Chicago is up 5% to 24%.

Our market share in San Antonio grew by 6% to almost 24%. In San Diego, we grew from 35% to 40%, in Central Valley from 31% to 38% and in Tucson from 14% to 18%. In Florida, our market share increased in Tampa from 15% to 21% and in Jacksonville from 17% to 24%. Here in Miami, while we did not grow our industry-leading market share, we did maintain a very healthy 75% share. Our sales pace of 4.9 homes per community in Q1 is up from the pace of 3.9 in Q1 of last year. This increase was by design to match the starts pace of 4.9 from the fourth quarter of 2023. In our first quarter, the 30-year fixed rate was 7.37% at the start of the quarter, then down to 6.75% in the middle of January and back up above 7% in the middle of February. Using insights from dynamic pricing, our homebuilding teams work closely with our Lennar Mortgage teams to find the right mortgage solutions homebuyer by homebuyer.

Onto cycle time and construction costs, as we continuously improve the way we execute this game plan, we are also continuously working to deepen the partnerships with our trade partners. We focus on maintaining both a high volume and a consistent volume of homes under construction. These and the other efficiencies discussed benefit our trade partners, enabling us to lower construction costs in a cooperative manner with our trades. By consistently starting homes, even as interest rates rose above 7% during the quarter, we increased our starts by 38% from the prior year and they were flat sequentially from Q4. This consistent and increased level of starts attracts a larger trade base to Lennar and together with a normalized supply chain led to another meaningful improvement in our cycle time.

For the first quarter, cycle time decreased by seven days sequentially from Q4 down to 154 days on average for single family homes, a 30% decrease year-over-year. The cycle time stabilizing combined with ongoing efficiency gains, we are now designing build templates that will further reduce cycle time on future start. We focused on the building blocks volume, consistency, predictability, cycle time and even flow to achieve production efficiencies, enabling our trade partners to lower their supply chain and labor costs. Look at the first quarter, as expected, our construction costs fell sequentially from Q4 by about 2% and on a year-over-year basis by about 11%. Moving forward to drive further efficiencies and cost reductions, we are laser focused on the consistent use of highly valued engineered home plans, which, as Stuart mentioned, we call our core product strategy.

This strategy has recently begun implementation in Texas and is scheduled to be rolled out in Florida this year and will follow thereafter in the rest of our markets. These engineered efficiencies, together with significantly higher use frequency of these core plans will further cement our position as a builder of choice for our trade partners. The reduced cost and time to build these core plans will help us achieve the goal of delivering attainable housing to meet the needs of the home buying consumer. Next, I'll discuss our land light strategy. In the first quarter, we continue to effectively work with our strategic land and land bank partners where they purchased land on our behalf and then delivered just in time homesites to our homebuilding machine, as Stuart described.

In the first quarter, about 80% of our $1.6 billion of land acquisitions in the quarter was finished homesites purchased from these various land structures. This 80% reflects a prior – reflects a view of prior land purchased into these structures that is now being delivered to us for home starts. In the first quarter, about 90% of our new land acquisitions were acquired into our off balance sheet land structures. We continue to make significant progress in the first quarter as our years of supply owned – year supply of owned homesites improved to 1.3 years down from 1.9 years and our controlled homesites percentage increased to 77% from 68% year-over-year. The bottom line is focusing on our operating strategies, which result in a reduced cycle time and the reduction in land own has increased our cash flow as well as improved our inventory churn, which now stands at 1.5 versus 1.3 last year, a 15% increase.

In the first quarter, we continue to refine the execution of the strategies, Stuart and I have reviewed with you. From the non-marketing and sales machine to our production processes and land strategies, our focus is consistent, improvements are continuous and changes ever present. Stuart said, it sounds simple, but it isn't. It's a lot of hard work, a lot of trial and error, and it takes a lot of grit. Fortunately, we have a great team of associates who have leaned into each of these strategies and are executing at the highest levels. I want to add my appreciation for their hard work and dedication. Now I'd like to turn it over to Diane.

Diane Bessette: Thank you, Jon. Good morning, everyone. So Stuart and Jon have provided a great deal of color regarding our home building performance. So therefore, I'm going to spend a few minutes on the results of our financial services operations, summarize again our balance sheet highlights and then provide high level estimates for Q2 2024. So starting with financial services. For the first quarter, our financial services team had operating earnings of $131 million. Mortgage operating earnings were $100 million compared to $59 million in the prior year. The increase in earnings was driven by an increase in lock volume, which was the result of higher homebuilding volume and a higher capture rate, as well as higher profit per locked loan, which resulted from higher secondary margins and lower cost per loan as the team continues to focus on efficiencies.

Title operating earnings were $33 million compared to $23 million in the prior year. Title earnings increased primarily as a result of higher volume and greater productivity as the team continues to embrace technology to run a more efficient business. These solid results work – these solid results were accomplished as a result of great synergies between our homebuilding and financial services team, they truly represent the spirit of one Lennar. So now, turning to our balance sheet. This quarter, once again, we were steadfast in our determination to churn our inventory and generate cash by maintaining production and pricing homes to market with the goal of delivering as many homes as possible to meet housing demand. The results of these actions was that we ended the quarter with $5 billion of cash and no borrowings on our $2.6 billion lucid credit facility.

This provided a total liquidity of $7.6 billion. As a result of our continued focus on balance sheet efficiency and reducing our capital investments, we once again made significant progress on our goal of becoming asset light. As Jon mentioned, at quarter end, our years owned improved to 1.3 years from 1.9 years in the prior year and our homesites controlled increased to 77% from 68% in the prior year. Our lowest years owned and highest controlled percent in our history. At quarter end, we owned just under 97,000 homesites and controlled 323,000 homesites for a total of 420,000 homesites. We believe this portfolio provides us with a strong competitive position to continue to grow market share in a capital efficient way. As Jon mentioned, we spent $1.6 billion on land purchases this quarter, however, 80% were finished home-sites where vertical construction will soon begin.

This is consistent with our manufacturing model of buying land on a just in time basis, which is less capital intensive. Our goal is that over time, we will continue to reduce our ownership of land and purchase homesites on adjust in time basis and our earnings should more consistently approximate cash flow as the need to reinvest back in the business is lessened. And finally, looking at returns, our inventory turn was once it was 30.5%. During the quarter, inconsistent with our production focus, we started about 18,300 300 homes and ended the quarter with just under 40,000 total homes in inventory. This inventory number includes about 2,200 models and also includes about 1,000 homes that were completed unsold, which is less than one home per community as we successfully manage our finished inventory levels.

Consistent with our commitment to strategic capital allocation, we repurchased 3.4 million of our outstanding shares for a total of $506 million. Additionally, during the quarter, as Stuart mentioned, we increased our annual dividend to $2 per share from a $1.50 per share. So we paid total dividends this quarter of $139 million. And looking at our debt maturity profile, our next senior note maturity is 454 million, which is due in April 2024. So next month. Then there are no maturities until May of 2025. We continue to benefit from our previous paydowns of senior notes and strong earnings generation, which brought our homebuilding debts total capital down to 9.6% at quarter end and improvement from 14.2% in the prior year. We remain committed to increasing shareholder returns.

Our stockholders’ equity increased to almost $27 billion and our book value per share increased to $95.74 and our return on equity was 15.8%. In summary, the strength of our balance sheet, strong liquidity and low leverage provides us with significant confidence and financial flexibility as we move through 2024. With that brief overview, I’d like to turn to Q2 and provide some high level guidance. Starting with new orders. We expect Q2 new orders to be in the range of 20,900 to 21,300 homes as we keep our production pace and sales pace closely aligned. We anticipate Q2 deliveries to be in the range of 19,000 to 19,500 homes, with a continued focus of efficiently turning inventory into cash. Our Q2 average sales price should be in the range of $420,000 to $425,000.

We expect gross margins to be about 22.5% and our SG&A about 7.2%, with both estimates having some plus or minus, depending on market conditions. For the combined homebuilding joint venture land sales and other categories, we expect to have earnings of about $25 million. We anticipate our Financial Services earnings for Q2 to be in the range of $110 million to $115 million based on expected product mix in our mortgage operations. We expect a loss of about $20 million for our multifamily business and also a loss of about $20 million for our Lennar Other category. The Lennar Other estimate does not include any potential mark-to-market adjustments to our public technology investments, since that adjustment will be determined by their stock prices at the end of the quarter.

Our Q2 corporate G&A should be about 1.8% of total revenues and our charitable contribution will be based on $1,000 per home delivered. We expect our tax rate to be about 24.5% and the weighted average share count should be approximately 274 million shares. And so on a combined basis, these estimates should produce an EPS range of approximately $3.15 to $3.25 per share for the second quarter. For the full year, we remain committed to delivering 80,000 homes, which is about a 10% growth year-over-year with a gross margin that is consistent with last year’s gross margin. We also remain confident with our cash flow generation as we indicated. As such, we are still targeting a capital allocation of at least $2.5 billion, $454 million which will be allocated to the April debt maturity that I mentioned and the balance to share repurchases.

And with that, let me turn it over to the operator.

Operator: [Operator Instructions] One moment please for the first question. And that comes from Alan Ratner with Zelman & Associates. Your line is open.

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