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Time to Buy the Dip in Lennar Corporation's (LEN) Stock After Earnings?
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Resilient demand stemming from a post-pandemic home shortage has fueled the strong stock performance of many homebuilders in recent years with Lennar Corporation (LEN - Free Report) standing out among the pack.
Although Lennar exceeded its fiscal second quarter top and bottom-line expectations after-market hours on Monday, its stock fell -5% in today’s trading session which may coincide with profit-taking amid weaker-than-expected EPS guidance. That said, let’s see if the post-earnings dip is a buying opportunity with Lennar’s stock now trading -13% from its 52-week high of $172 in March.
Q2 Review
Lennar delivered approximately 19,700 homes during the second quarter and sold a total of 21,300 homes. This led to Q2 sales of $8.76 billion which beat estimates by 2% and rose 8% from $8.04 billion in the comparative quarter. On the bottom line, Q2 EPS of $3.38 came in 5% better than expected and spiked 15% from $2.94 per share a year ago.
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Guidance
Lennar expects Q3 deliveries to be in the range of 20,500 to 21,000 homes and still expects total home deliveries to increase 10% this year to approximately 80,000 on a margin of just over 23%. The company also plans to repurchase $2 billion of stock in 2024 based on its very strong cash flow.
However, Lennar projects Q3 EPS to be in the range of $3.50-$3.65 which fell below the current Zacks Consensus of $3.78 per share (Current Qtr below). Based on Zacks estimates, Lennar’s annual earnings are projected to increase 1% in fiscal 2024 and are forecasted to rise another 12% in FY25 to $16.25 per share.
Image Source: Zacks Investment Research
Recent Performance
Following today’s selloff, Lennar’s stock has a virtually flat year-to-date performance but is still up +24% over the last year which has matched the S&P 500 but trails the Zacks Building Products-Home Builders Market’s +32% with two notable industry outperformers being Toll Brothers (TOL - Free Report) at +60% and PulteGroup (PHM - Free Report) at +51%.
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Valuation Comparison
In terms of P/E valuation, Lennar’s 10.8X forward earnings multiple is well below the S&P 500’s 22.9X while being roughly on par with its industry average although it's noteworthy that Toll Brothers and PulteGroup trade at noticeable discounts at 8.5X and 8.8X respectively.
Image Source: Zacks Investment Research
Bottom Line
Lennar Corporation’s stock currently lands a Zacks Rank #3 (Hold). While Lennar’s long-term prospects remain intriguing more upside will largely depend on the trend of earnings estimate revisions following its Q2 report which unfortunately may decline after EPS guidance for the current quarter came in below estimates.
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Time to Buy the Dip in Lennar Corporation's (LEN) Stock After Earnings?
Resilient demand stemming from a post-pandemic home shortage has fueled the strong stock performance of many homebuilders in recent years with Lennar Corporation (LEN - Free Report) standing out among the pack.
Although Lennar exceeded its fiscal second quarter top and bottom-line expectations after-market hours on Monday, its stock fell -5% in today’s trading session which may coincide with profit-taking amid weaker-than-expected EPS guidance. That said, let’s see if the post-earnings dip is a buying opportunity with Lennar’s stock now trading -13% from its 52-week high of $172 in March.
Q2 Review
Lennar delivered approximately 19,700 homes during the second quarter and sold a total of 21,300 homes. This led to Q2 sales of $8.76 billion which beat estimates by 2% and rose 8% from $8.04 billion in the comparative quarter. On the bottom line, Q2 EPS of $3.38 came in 5% better than expected and spiked 15% from $2.94 per share a year ago.
Image Source: Zacks Investment Research
Guidance
Lennar expects Q3 deliveries to be in the range of 20,500 to 21,000 homes and still expects total home deliveries to increase 10% this year to approximately 80,000 on a margin of just over 23%. The company also plans to repurchase $2 billion of stock in 2024 based on its very strong cash flow.
However, Lennar projects Q3 EPS to be in the range of $3.50-$3.65 which fell below the current Zacks Consensus of $3.78 per share (Current Qtr below). Based on Zacks estimates, Lennar’s annual earnings are projected to increase 1% in fiscal 2024 and are forecasted to rise another 12% in FY25 to $16.25 per share.
Image Source: Zacks Investment Research
Recent Performance
Following today’s selloff, Lennar’s stock has a virtually flat year-to-date performance but is still up +24% over the last year which has matched the S&P 500 but trails the Zacks Building Products-Home Builders Market’s +32% with two notable industry outperformers being Toll Brothers (TOL - Free Report) at +60% and PulteGroup (PHM - Free Report) at +51%.
Image Source: Zacks Investment Research
Valuation Comparison
In terms of P/E valuation, Lennar’s 10.8X forward earnings multiple is well below the S&P 500’s 22.9X while being roughly on par with its industry average although it's noteworthy that Toll Brothers and PulteGroup trade at noticeable discounts at 8.5X and 8.8X respectively.
Image Source: Zacks Investment Research
Bottom Line
Lennar Corporation’s stock currently lands a Zacks Rank #3 (Hold). While Lennar’s long-term prospects remain intriguing more upside will largely depend on the trend of earnings estimate revisions following its Q2 report which unfortunately may decline after EPS guidance for the current quarter came in below estimates.