We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lennar Corporation (LEN - Free Report) reported impressive results for second-quarter fiscal 2023, where earnings and revenues beat the Zacks Consensus Estimate. Following the results, the company’s shares rose 2.2% in an after-hours trading session on Jun 14.
The housing market condition is normalizing and has been gaining from the pent-up demand condition, given the shortage of existing homes in the sector. The homebuilder has also lifted its deliveries expectation for the year.
Pertaining to the prospect, Stuart Miller, executive chairman of Lennar, said, “As consumers have come to accept a "new normal" range for interest rates, demand has accelerated, leaving the market to reconcile the chronic supply shortage derived from over a decade of production deficits. Simply put, America needs more housing, particularly affordable workforce housing, and demand is strong when price and interest rates are affordable."
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses on technology investments) of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.32 per share by 26.7% but decreased 37.3% year over year.
Lennar Corporation Price, Consensus and EPS Surprise
Revenues of $8.05 billion topped the Zacks Consensus Estimate of $7.27 billion by 10.5% but declined 3.8% year over year.
Segment Details
Homebuilding: Revenues of the segment totaled $7.67 billion, down 4% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $7.6 billion to total revenues, down 4.1% from a year ago. The decrease was due to the lower average sales price of homes, partly offset by higher deliveries.
On the other hand, Land sales accounted for $16.3 million, up from $7.5 million in the prior-year quarter. The Other homebuilding unit contributed $17.1 million to homebuilding revenues, up from $6.8 million a year ago.
Home deliveries for the reported quarter improved 3% from the year-ago level to 17,074 units. The average sales price of homes delivered was $449,000, down 7% from the year-ago figure due to pricing-to-market and product mix.
New orders rose 0.5% from the year-ago quarter to 17,885 homes. Backlog at the fiscal second-quarter end declined 29.3% from a year ago to 20,214 homes. Potential housing revenues from backlog decreased 35.1% year over year to $9.53 billion.
The gross margin on home sales was 22.5% for the quarter, down 700 basis points (bps). The downside was due to lower revenues per square foot as LEN priced homes to market, while costs per square foot increased on higher materials and labor costs. Land costs also increased year over year.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — increased 60 bps to 6.7% due to more use of brokers in current market conditions.
Homebuilding’s operating earnings of $1.21 billion decreased from the year-ago level of $1.88 billion. Net margin as a percentage of home sales contracted 760 bps to 15.8%.
Financial Services: The segment’s revenues increased year over year to $223 million from $200.2 million for the reported quarter. Operating earnings for the quarter rose to $112.6 million from $103.9 million a year ago.
Lennar Multi-Family: Revenues of $151.7 million in the segment were down from $176 million in the prior-year quarter. The segment registered an operating loss of $8.2 million for the quarter against earnings of $0.7 million a year ago.
Lennar Other: The segment’s revenues totaled $0.4 million, down from $4.5 million a year ago. The segment’s operating loss was $18.4 million for the quarter compared with $108.4 million in the comparable period of 2022.
Financials
As of May 31, Lennar had homebuilding cash and cash equivalents of $4 billion, down from $4.62 billion at the end of fiscal 2022. Total homebuilding debt was $3.85 billion as of May 31, down from $4.05 billion at the fiscal 2022-end. Homebuilding debt to capital at the fiscal first-quarter end was 13.3%, down from 14.4% at the fiscal 2022-end and 17.7% from a year-ago period.
LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $6.6 billion of liquidity.
The company repurchased 2 million shares for $208 million at an average share price of $103.91 in the fiscal second quarter.
Guidance
For third-quarter fiscal 2023, the company expects deliveries within 17,750-18,250 homes with a gross margin on home sales of 23.5-24%. New orders are likely to be between 18,000 and 19,000 units, and the average selling price is expected to be similar to the fiscal second quarter.
SG&A expenses, as a percentage of home sales, are likely to be within 6.7-6.8% for the quarter. Financial Services’ operating earnings are expected to be in the range of $100-$105 million.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier).
Zacks Rank & Other Stocks to Consider
Lennar currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the Zacks Construction sector are:
PulteGroup Inc. (PHM - Free Report) has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes. PulteGroup, presently sports a Zacks Rank #1 (Strong Buy), has jumped 60.9% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its 2023 and 2024 earnings has been upwardly revised by 0.9% and 2.4%, respectively, over the past 30 days. Its earnings topped consensus estimates in three of the trailing four quarters and missed once, with the average surprise being 15.6%. Again, it carries an impressive VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.
M.D.C. Holdings : This U.S.-based homebuilding and financial services company gained 40.6% this year.
Earnings estimates for this Zacks Rank #1 company’s 2023 have increased to $3.39 per share from $3.23 per share over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed on other two occasions, the positive average being 27.8%. Impressively, it carries a VGM Score of A.
Toll Brothers (TOL - Free Report) : Based in Horsham, PA, this leading builder of luxury homes has gained 46.8% this year.
TOL currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 have increased to $10.36 per share from $8.66 per share over the past 30 days. The company’s earnings topped the Zacks Consensus Estimate in all the trailing four quarters, the average being 24.4%. Again, it carries an impressive VGM Score of A.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Lennar (LEN) Q2 Earnings & Revenues Top, View Up, Stock Rises
Lennar Corporation (LEN - Free Report) reported impressive results for second-quarter fiscal 2023, where earnings and revenues beat the Zacks Consensus Estimate. Following the results, the company’s shares rose 2.2% in an after-hours trading session on Jun 14.
The housing market condition is normalizing and has been gaining from the pent-up demand condition, given the shortage of existing homes in the sector. The homebuilder has also lifted its deliveries expectation for the year.
Pertaining to the prospect, Stuart Miller, executive chairman of Lennar, said, “As consumers have come to accept a "new normal" range for interest rates, demand has accelerated, leaving the market to reconcile the chronic supply shortage derived from over a decade of production deficits. Simply put, America needs more housing, particularly affordable workforce housing, and demand is strong when price and interest rates are affordable."
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses on technology investments) of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.32 per share by 26.7% but decreased 37.3% year over year.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Revenues of $8.05 billion topped the Zacks Consensus Estimate of $7.27 billion by 10.5% but declined 3.8% year over year.
Segment Details
Homebuilding: Revenues of the segment totaled $7.67 billion, down 4% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $7.6 billion to total revenues, down 4.1% from a year ago. The decrease was due to the lower average sales price of homes, partly offset by higher deliveries.
On the other hand, Land sales accounted for $16.3 million, up from $7.5 million in the prior-year quarter. The Other homebuilding unit contributed $17.1 million to homebuilding revenues, up from $6.8 million a year ago.
Home deliveries for the reported quarter improved 3% from the year-ago level to 17,074 units. The average sales price of homes delivered was $449,000, down 7% from the year-ago figure due to pricing-to-market and product mix.
New orders rose 0.5% from the year-ago quarter to 17,885 homes. Backlog at the fiscal second-quarter end declined 29.3% from a year ago to 20,214 homes. Potential housing revenues from backlog decreased 35.1% year over year to $9.53 billion.
The gross margin on home sales was 22.5% for the quarter, down 700 basis points (bps). The downside was due to lower revenues per square foot as LEN priced homes to market, while costs per square foot increased on higher materials and labor costs. Land costs also increased year over year.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — increased 60 bps to 6.7% due to more use of brokers in current market conditions.
Homebuilding’s operating earnings of $1.21 billion decreased from the year-ago level of $1.88 billion. Net margin as a percentage of home sales contracted 760 bps to 15.8%.
Financial Services: The segment’s revenues increased year over year to $223 million from $200.2 million for the reported quarter. Operating earnings for the quarter rose to $112.6 million from $103.9 million a year ago.
Lennar Multi-Family: Revenues of $151.7 million in the segment were down from $176 million in the prior-year quarter. The segment registered an operating loss of $8.2 million for the quarter against earnings of $0.7 million a year ago.
Lennar Other: The segment’s revenues totaled $0.4 million, down from $4.5 million a year ago. The segment’s operating loss was $18.4 million for the quarter compared with $108.4 million in the comparable period of 2022.
Financials
As of May 31, Lennar had homebuilding cash and cash equivalents of $4 billion, down from $4.62 billion at the end of fiscal 2022. Total homebuilding debt was $3.85 billion as of May 31, down from $4.05 billion at the fiscal 2022-end. Homebuilding debt to capital at the fiscal first-quarter end was 13.3%, down from 14.4% at the fiscal 2022-end and 17.7% from a year-ago period.
LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $6.6 billion of liquidity.
The company repurchased 2 million shares for $208 million at an average share price of $103.91 in the fiscal second quarter.
Guidance
For third-quarter fiscal 2023, the company expects deliveries within 17,750-18,250 homes with a gross margin on home sales of 23.5-24%. New orders are likely to be between 18,000 and 19,000 units, and the average selling price is expected to be similar to the fiscal second quarter.
SG&A expenses, as a percentage of home sales, are likely to be within 6.7-6.8% for the quarter. Financial Services’ operating earnings are expected to be in the range of $100-$105 million.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier).
Zacks Rank & Other Stocks to Consider
Lennar currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the Zacks Construction sector are:
PulteGroup Inc. (PHM - Free Report) has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes. PulteGroup, presently sports a Zacks Rank #1 (Strong Buy), has jumped 60.9% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its 2023 and 2024 earnings has been upwardly revised by 0.9% and 2.4%, respectively, over the past 30 days. Its earnings topped consensus estimates in three of the trailing four quarters and missed once, with the average surprise being 15.6%. Again, it carries an impressive VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.
M.D.C. Holdings : This U.S.-based homebuilding and financial services company gained 40.6% this year.
Earnings estimates for this Zacks Rank #1 company’s 2023 have increased to $3.39 per share from $3.23 per share over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed on other two occasions, the positive average being 27.8%. Impressively, it carries a VGM Score of A.
Toll Brothers (TOL - Free Report) : Based in Horsham, PA, this leading builder of luxury homes has gained 46.8% this year.
TOL currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 have increased to $10.36 per share from $8.66 per share over the past 30 days. The company’s earnings topped the Zacks Consensus Estimate in all the trailing four quarters, the average being 24.4%. Again, it carries an impressive VGM Score of A.