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Lennar (LEN) Up 5.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Lennar (LEN - Free Report) . Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lennar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Lennar Corporation reported mixed fourth-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
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 2022 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%. ASP is expected to be between $440,000 and $450,000. New orders are likely to be between 12,000 and 13,500 units. SG&A expenses, as a percentage of home sales, are likely to be nearly 8% for the quarter. For the fiscal 2023, the company expects deliveries within 60,000-65,000 homes.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -37.34% due to these changes.
VGM Scores
Currently, Lennar has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lennar has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lennar is part of the Zacks Building Products - Home Builders industry. Over the past month, Toll Brothers (TOL - Free Report) , a stock from the same industry, has gained 9.1%. The company reported its results for the quarter ended October 2022 more than a month ago.
Toll Brothers reported revenues of $3.71 billion in the last reported quarter, representing a year-over-year change of +22.1%. EPS of $4.67 for the same period compares with $3.02 a year ago.
For the current quarter, Toll Brothers is expected to post earnings of $1.37 per share, indicating a change of +10.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
Toll Brothers has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Lennar (LEN) Up 5.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Lennar (LEN - Free Report) . Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lennar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Lennar Q4 Earnings Beat, Revenues Miss, Tepid FY 2023 Views
Lennar Corporation reported mixed fourth-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
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 2022 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%. ASP is expected to be between $440,000 and $450,000. New orders are likely to be between 12,000 and 13,500 units. SG&A expenses, as a percentage of home sales, are likely to be nearly 8% for the quarter. For the fiscal 2023, the company expects deliveries within 60,000-65,000 homes.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -37.34% due to these changes.
VGM Scores
Currently, Lennar has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lennar has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lennar is part of the Zacks Building Products - Home Builders industry. Over the past month, Toll Brothers (TOL - Free Report) , a stock from the same industry, has gained 9.1%. The company reported its results for the quarter ended October 2022 more than a month ago.
Toll Brothers reported revenues of $3.71 billion in the last reported quarter, representing a year-over-year change of +22.1%. EPS of $4.67 for the same period compares with $3.02 a year ago.
For the current quarter, Toll Brothers is expected to post earnings of $1.37 per share, indicating a change of +10.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
Toll Brothers has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.