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Here's Why Lennar (LEN) is in Warren Buffett's Bucket List
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Despite the recent hike in the 30-year fixed-rate mortgage, elevated construction and financing costs and a lack of skilled labor, the CEO of Berkshire Hathaway Inc. (BRK.B - Free Report) — Warren Buffett — recently invested $814 million in three leading U.S. homebuilders, which include Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and NVR, Inc. (NVR - Free Report) .
A lack of existing inventory and solid demand for housing has been driving the Zacks Building Products - Home Builders industry. Homebuilding is one of the classic early-stage cyclical industries to emerge from an anticipated recession. A nationwide shortfall of approximately 1.5 million housing units substantiates this position.
Lennar, one of the top homebuilders in the United States, also has an optimistic view for the second half of fiscal 2023. Although its second-quarter fiscal 2023 results were down for major metrics due to difficult year-over-year comparisons, the company expects solid third-quarter and fiscal 2023 deliveries and orders.
Lennar shares have declined 9% in a month compared with the industry's 7.3% fall.
Image Source: Zacks Investment Research
Let’s check the factors supporting this Zacks Rank #2 (Buy) company’s growth potential.
For third-quarter fiscal 2023, Lennar expects deliveries within 17,750-18,250 homes compared with 17,248 units reported a year ago. New orders are likely to be between 18,000 and 19,000 units (significantly up from 14,366 units posted a year ago) and the average selling price is expected to be similar to the fiscal second quarter.
Financial Services’ operating earnings are expected to be in the range of $100-$105 million, up from $63 million generated in the prior-year period.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier). The new projection is strong compared with the previous year’s reading of 66,399 homes.
Factors Supporting Lennar’s Growth Prospect
Lennar has undertaken various price actions and cost-saving moves that are helping it mitigate macroeconomic woes. Also, digital marketing platforms, a land-lighter strategy and a dynamic pricing model bode well. Strong liquidity positions Lennar well for the future.
LEN has adopted a price-to-market strategy, which means the company is continuously searching for a market-clearing price for each of its homes on a community-by-community basis.
The company has increasingly integrated its marketing strategy via digital channels. It strategically invests in companies involved in technology initiatives that enhance the homebuying experience, reduce SG&A expenses and boost innovation. A dynamic pricing model, along with an improving digital marketing platform, is expected to drive sales volume and maintain consistent production levels.
LEN is mainly focused on becoming a pure-play homebuilder and a financial services company. To this end, it plans to spin off all or parts of non-core businesses and create a joint venture to provide single-family homes for rent. The company will now be an asset-light asset management business with a limited balance sheet.
A Look at DHI & NVR’s Growth Potential
DHI now expects consolidated revenues for fiscal 2023 to be in the range of $34.7-$35.1 billion, up from the prior expectation of $31.5-$33 billion. DHI reported $33.5 billion in revenues in fiscal 2022. Homes closed are anticipated within 82,800-83,300 units versus 77,000-80,000 units expected earlier.
For the Rental business, the company expects homes closed within 6,500-7,000 units versus prior guidance of 4,000-5,000 units. Fiscal 2023 cash flow from homebuilding operations on a consolidated basis is expected to be more than $3 billion.
DHI’s fiscal 2023 earnings per share have increased to $13.07 per share from $11.28 over the past 30 days. It carries an impressive VGM Score of A. It currently carries a Zacks Rank #3 (Hold).
NVR’s new orders grew 26.6% in the second quarter of 2023 from the year-ago quarter and cancellation rates declined to 11% from 14% a year ago. The shortage of existing homes for sale in the market has been driving demand for new homes despite rate-hike challenges. Also, a high ROE and a solid liquidity position add to the tailwinds.
The Zacks Consensus Estimate for its 2023 earnings has been revised upward to $440.88 per share from $408.99 over the past 30 days.
About Berkshire Hathaway
BRK.B is one of the largest property and casualty insurance companies measured by premium volume. Berkshire's inorganic growth story remains impressive with strategic acquisitions. A strong cash position supports earnings-accretive bolt-on buyouts and indicates financial flexibility.
Berkshire presently has a Zacks Rank #3. The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised to $16.72 per share from $16.31 over the past 30 days.
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Here's Why Lennar (LEN) is in Warren Buffett's Bucket List
Despite the recent hike in the 30-year fixed-rate mortgage, elevated construction and financing costs and a lack of skilled labor, the CEO of Berkshire Hathaway Inc. (BRK.B - Free Report) — Warren Buffett — recently invested $814 million in three leading U.S. homebuilders, which include Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and NVR, Inc. (NVR - Free Report) .
A lack of existing inventory and solid demand for housing has been driving the Zacks Building Products - Home Builders industry. Homebuilding is one of the classic early-stage cyclical industries to emerge from an anticipated recession. A nationwide shortfall of approximately 1.5 million housing units substantiates this position.
Lennar, one of the top homebuilders in the United States, also has an optimistic view for the second half of fiscal 2023. Although its second-quarter fiscal 2023 results were down for major metrics due to difficult year-over-year comparisons, the company expects solid third-quarter and fiscal 2023 deliveries and orders.
Lennar shares have declined 9% in a month compared with the industry's 7.3% fall.
Image Source: Zacks Investment Research
Let’s check the factors supporting this Zacks Rank #2 (Buy) company’s growth potential.
Impressive Q3 & FY’23 Guidance Supports Buffett’s Solid Pick
For third-quarter fiscal 2023, Lennar expects deliveries within 17,750-18,250 homes compared with 17,248 units reported a year ago. New orders are likely to be between 18,000 and 19,000 units (significantly up from 14,366 units posted a year ago) and the average selling price is expected to be similar to the fiscal second quarter.
Financial Services’ operating earnings are expected to be in the range of $100-$105 million, up from $63 million generated in the prior-year period.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier). The new projection is strong compared with the previous year’s reading of 66,399 homes.
Factors Supporting Lennar’s Growth Prospect
Lennar has undertaken various price actions and cost-saving moves that are helping it mitigate macroeconomic woes. Also, digital marketing platforms, a land-lighter strategy and a dynamic pricing model bode well. Strong liquidity positions Lennar well for the future.
LEN has adopted a price-to-market strategy, which means the company is continuously searching for a market-clearing price for each of its homes on a community-by-community basis.
The company has increasingly integrated its marketing strategy via digital channels. It strategically invests in companies involved in technology initiatives that enhance the homebuying experience, reduce SG&A expenses and boost innovation. A dynamic pricing model, along with an improving digital marketing platform, is expected to drive sales volume and maintain consistent production levels.
LEN is mainly focused on becoming a pure-play homebuilder and a financial services company. To this end, it plans to spin off all or parts of non-core businesses and create a joint venture to provide single-family homes for rent. The company will now be an asset-light asset management business with a limited balance sheet.
A Look at DHI & NVR’s Growth Potential
DHI now expects consolidated revenues for fiscal 2023 to be in the range of $34.7-$35.1 billion, up from the prior expectation of $31.5-$33 billion. DHI reported $33.5 billion in revenues in fiscal 2022. Homes closed are anticipated within 82,800-83,300 units versus 77,000-80,000 units expected earlier.
For the Rental business, the company expects homes closed within 6,500-7,000 units versus prior guidance of 4,000-5,000 units. Fiscal 2023 cash flow from homebuilding operations on a consolidated basis is expected to be more than $3 billion.
DHI’s fiscal 2023 earnings per share have increased to $13.07 per share from $11.28 over the past 30 days. It carries an impressive VGM Score of A. It currently carries a Zacks Rank #3 (Hold).
NVR’s new orders grew 26.6% in the second quarter of 2023 from the year-ago quarter and cancellation rates declined to 11% from 14% a year ago. The shortage of existing homes for sale in the market has been driving demand for new homes despite rate-hike challenges. Also, a high ROE and a solid liquidity position add to the tailwinds.
NVR presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for its 2023 earnings has been revised upward to $440.88 per share from $408.99 over the past 30 days.
About Berkshire Hathaway
BRK.B is one of the largest property and casualty insurance companies measured by premium volume. Berkshire's inorganic growth story remains impressive with strategic acquisitions. A strong cash position supports earnings-accretive bolt-on buyouts and indicates financial flexibility.
Berkshire presently has a Zacks Rank #3. The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised to $16.72 per share from $16.31 over the past 30 days.