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Lennar (LEN) Q4 Earnings Beat, Revenues Miss, Stock Down
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Lennar Corporation (LEN - Free Report) reported mixed fourth-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Following the results, the company’s shares declined 2.2% in after-hour trading session on Dec 14. Disappointing new orders guidance hurt investors’ sentiment.
Pertaining to the quarterly release, Stuart Miller, executive chairman of Lennar, said, “As we have seen over the past quarters, interest rates are fluctuating and are likely to continue to move, and the housing market will continue to rebalance pricing and interest rates. While we have a clear-cut strategy of execution, as we look towards 2023, we will only give broad boundaries for deliveries and gross margin. For the first quarter of 2023, the range for deliveries will be between 12,000 to 13,500 homes and gross margin will be about 21%. For the full year 2023, the range for deliveries will be between 60,000 to 65,000 homes.”
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses) of $5.02 per share, which surpassed the Zacks Consensus Estimate of $4.92 per share and increased 15% year over year. This marked the 15th consecutive quarter of an earnings beat. The bottom line primarily benefited from effective cost control and focus on making the company’s homebuilding platform more efficient, which resulted in higher operating leverage.
Revenues of $10.17 billion missed the Zacks Consensus Estimate of $10.24 billion. The reported figure, however, grew 20.6% year over year.
Segment Details
Homebuilding: The revenues of the segment totaled $9.74 billion, up 21.5% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $9.65 billion to total revenues, up 21.1% from a year ago. Land sales accounted for $79.2 million, up from $36.4 million in the prior-year quarter. The Other homebuilding unit contributed $8.17 million to homebuilding revenues, down from $8.45 million a year ago.
Home deliveries for the reported quarter improved 13% from the year-ago level to 20,064 units. Notably, supply-chain constraints are improving but continue to limit deliveries. The average sales price of homes delivered was $483,000, up 8% from the year-ago figure.
New orders declined 15% from the year-ago quarter to 13,200 homes. The potential value of net orders also decreased 24% year over year to $5.5 billion.
Backlog at the fiscal fourth-quarter end declined 21% from a year ago to 18,869 homes. Potential housing revenues from backlog decreased 23% year over year to $8.7 billion.
Homebuilding Margins
The gross margin on home sales was 24.8% for the quarter, down 320 basis points (bps). The downside can be attributed to an increase in costs per square foot primarily owing to increased material and labor costs, and land costs. However, revenue per quarter foot increased in the quarter.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — declined 20 bps to 5.8% on increase in leverage owing to higher volume and average sales price. This marks the lowest percentage for any quarter in Lennar’s history.
Homebuilding operating’s earnings of $1.82 billion for the quarter increased from the year-ago level of $1.75 billion.
Financial Services: The segment’s revenues increased year over year to $230.7 million from $229 million for the reported quarter. Operating earnings for the quarter also rose to $125.2 million from $111.4 million a year ago.
Lennar Multi-Family: Revenues of $179.2 million in the segment were down from $188.4 million in the prior-year quarter. The segment registered operating earnings of $14.9 million for the quarter compared with a loss of $9.3 million a year ago.
Lennar Other: The segment’s revenues totaled $22.8 million, up from $0.6 million a year ago. The segment’s operating loss was $105.1 million for the quarter compared with a loss of $176.2 million in the comparable period of 2021.
Financials
As of Nov 30, Lennar had homebuilding cash and cash equivalents of $4.6 billion, up from $2.74 billion on Nov 30, 2021. Total homebuilding debt was $4 billion as of Aug 31, down from $4.65 billion at the fiscal 2021-end. Homebuilding debt to capital at the fiscal fourth-quarter end was 14.4%, down from 18.3% at the fiscal 2021-end.
LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $7.2 billion of available capacity.
Lennar repurchased 11 million shares for $967.4 million in fiscal 2022.
Guidance
For the first-quarter fiscal 2023, the company expects deliveries within 12,000-13,500 homes, with a gross margin on home sales of nearly 21%. New orders are likely to be between 12,000 and 13,500 units, and ASP is expected to be between $440,000 and $450,000. SG&A expenses, as a percentage of home sales, are likely to be nearly 8% for the quarter.
Some better-ranked stocks in the Zacks Construction sector are CRH plc (CRH - Free Report) , Janus International Group, Inc. (JBI - Free Report) and United Rentals, Inc. (URI - Free Report) , each carrying a Zacks Rank #2 (Buy).
CRH manufactures cement, concrete products, aggregates, roofing, insulation and other building materials.
CRH’s expected earnings growth rate for 2022 is 22.1%. The Zacks Consensus Estimate for current-year and next-year earnings has improved to $3.98 per share and $3.43 per share from $3.46 per share and $3.42 per share, respectively, over the past 30 days.
Headquartered in Temple, GA, Janus manufactures and supplies turn-key self-storage, and commercial and industrial building solutions. Solid backlog levels, an impressive project pipeline, productivity improvements and commercial actions, including pricing, are expected to drive growth. The company is expected to benefit from its one-stop-shop offering with a leading market share position in self-storage doors and related design and installation services.
Janus’ earnings for 2022 are expected to rise 21%. The Zacks Consensus Estimate for current-year and next-year earnings has improved to 75 cents per share and 88 cents per share from 69 cents per share and 80 cents per shares, respectively, over the past 30 days.
United Rentals is the largest equipment rental company in the world, with an integrated network of 1,390 rental locations in the United States, Canada and Europe.
URI’s expected earnings growth rates for 2022 and 2023 are 47.3% and 12.5%, respectively. The Zacks Consensus Estimate for current-year and next-year earnings has improved to $32.50 per share and $36.57 per share from $32.41 per share and $36.27 per share, respectively, over the past 30 days.
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Lennar (LEN) Q4 Earnings Beat, Revenues Miss, Stock Down
Lennar Corporation (LEN - Free Report) reported mixed fourth-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Following the results, the company’s shares declined 2.2% in after-hour trading session on Dec 14. Disappointing new orders guidance hurt investors’ sentiment.
Pertaining to the quarterly release, Stuart Miller, executive chairman of Lennar, said, “As we have seen over the past quarters, interest rates are fluctuating and are likely to continue to move, and the housing market will continue to rebalance pricing and interest rates. While we have a clear-cut strategy of execution, as we look towards 2023, we will only give broad boundaries for deliveries and gross margin. For the first quarter of 2023, the range for deliveries will be between 12,000 to 13,500 homes and gross margin will be about 21%. For the full year 2023, the range for deliveries will be between 60,000 to 65,000 homes.”
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses) of $5.02 per share, which surpassed the Zacks Consensus Estimate of $4.92 per share and increased 15% year over year. This marked the 15th consecutive quarter of an earnings beat. The bottom line primarily benefited from effective cost control and focus on making the company’s homebuilding platform more efficient, which resulted in higher operating leverage.
Revenues of $10.17 billion missed the Zacks Consensus Estimate of $10.24 billion. The reported figure, however, grew 20.6% year over year.
Segment Details
Homebuilding: The revenues of the segment totaled $9.74 billion, up 21.5% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $9.65 billion to total revenues, up 21.1% from a year ago. Land sales accounted for $79.2 million, up from $36.4 million in the prior-year quarter. The Other homebuilding unit contributed $8.17 million to homebuilding revenues, down from $8.45 million a year ago.
Home deliveries for the reported quarter improved 13% from the year-ago level to 20,064 units. Notably, supply-chain constraints are improving but continue to limit deliveries. The average sales price of homes delivered was $483,000, up 8% from the year-ago figure.
New orders declined 15% from the year-ago quarter to 13,200 homes. The potential value of net orders also decreased 24% year over year to $5.5 billion.
Backlog at the fiscal fourth-quarter end declined 21% from a year ago to 18,869 homes. Potential housing revenues from backlog decreased 23% year over year to $8.7 billion.
Homebuilding Margins
The gross margin on home sales was 24.8% for the quarter, down 320 basis points (bps). The downside can be attributed to an increase in costs per square foot primarily owing to increased material and labor costs, and land costs. However, revenue per quarter foot increased in the quarter.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — declined 20 bps to 5.8% on increase in leverage owing to higher volume and average sales price. This marks the lowest percentage for any quarter in Lennar’s history.
Homebuilding operating’s earnings of $1.82 billion for the quarter increased from the year-ago level of $1.75 billion.
Financial Services: The segment’s revenues increased year over year to $230.7 million from $229 million for the reported quarter. Operating earnings for the quarter also rose to $125.2 million from $111.4 million a year ago.
Lennar Multi-Family: Revenues of $179.2 million in the segment were down from $188.4 million in the prior-year quarter. The segment registered operating earnings of $14.9 million for the quarter compared with a loss of $9.3 million a year ago.
Lennar Other: The segment’s revenues totaled $22.8 million, up from $0.6 million a year ago. The segment’s operating loss was $105.1 million for the quarter compared with a loss of $176.2 million in the comparable period of 2021.
Financials
As of Nov 30, Lennar had homebuilding cash and cash equivalents of $4.6 billion, up from $2.74 billion on Nov 30, 2021. Total homebuilding debt was $4 billion as of Aug 31, down from $4.65 billion at the fiscal 2021-end. Homebuilding debt to capital at the fiscal fourth-quarter end was 14.4%, down from 18.3% at the fiscal 2021-end.
LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $7.2 billion of available capacity.
Lennar repurchased 11 million shares for $967.4 million in fiscal 2022.
Guidance
For the first-quarter fiscal 2023, the company expects deliveries within 12,000-13,500 homes, with a gross margin on home sales of nearly 21%. New orders are likely to be between 12,000 and 13,500 units, and ASP is expected to be between $440,000 and $450,000. SG&A expenses, as a percentage of home sales, are likely to be nearly 8% for the quarter.
Zacks Rank & Stocks to Consider
Lennar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Construction sector are CRH plc (CRH - Free Report) , Janus International Group, Inc. (JBI - Free Report) and United Rentals, Inc. (URI - Free Report) , each carrying a Zacks Rank #2 (Buy).
CRH manufactures cement, concrete products, aggregates, roofing, insulation and other building materials.
CRH’s expected earnings growth rate for 2022 is 22.1%. The Zacks Consensus Estimate for current-year and next-year earnings has improved to $3.98 per share and $3.43 per share from $3.46 per share and $3.42 per share, respectively, over the past 30 days.
Headquartered in Temple, GA, Janus manufactures and supplies turn-key self-storage, and commercial and industrial building solutions. Solid backlog levels, an impressive project pipeline, productivity improvements and commercial actions, including pricing, are expected to drive growth. The company is expected to benefit from its one-stop-shop offering with a leading market share position in self-storage doors and related design and installation services.
Janus’ earnings for 2022 are expected to rise 21%. The Zacks Consensus Estimate for current-year and next-year earnings has improved to 75 cents per share and 88 cents per share from 69 cents per share and 80 cents per shares, respectively, over the past 30 days.
United Rentals is the largest equipment rental company in the world, with an integrated network of 1,390 rental locations in the United States, Canada and Europe.
URI’s expected earnings growth rates for 2022 and 2023 are 47.3% and 12.5%, respectively. The Zacks Consensus Estimate for current-year and next-year earnings has improved to $32.50 per share and $36.57 per share from $32.41 per share and $36.27 per share, respectively, over the past 30 days.