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 (LEN) Now a Buy on Positive Housing Market Outlook
Read MoreHide Full Article
On May 23, we upgraded Lennar Corporation (LEN - Free Report) by a notch to a Zacks Rank #2 (Buy).
Lennar is one of the best positioned homebuilders to capitalize on the housing recovery, courtesy of its diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage.
Though Lennar’s shares have gained 22.1% year to date, marginally underperforming the 24.3% growth of the Zacks categorized Building-Residential/Commercial industry, estimates have moved up.
Current year estimates rose 1.9%, reflecting seven upward and one downward revision in the past 60 days. Next year estimates moved up 6.2%, reflecting seven upward and no downward revision in the same time frame. Also, Lennar surpassed earnings in all of the past four quarters at an average of 8.7%. Diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage should drive the stock’s performance, moving ahead.
Thanks to strong demand in housing, Lennar started 2017 on a strong performance, beating the Zacks Consensus Estimate for both earnings and sales in the first quarter. Homebuilding revenues rose 12.8% in the first quarter, backed by an increase in home deliveries and consistent average selling price. Lennar’s core homebuilding results remain consistent with the “slow and steady” housing recovery.
Steady job and wage growth, a recovering economy, moderating home price gains, historically low interest/mortgage rates, rising rentals, rapidly increasing household formation and a limited supply of inventory point at strong housing demand in 2017.
Meanwhile, Lennar has strategically shifted from a land heavy acquisition strategy to acquiring lands with a shorter two to three-year average life. The company is presently focusing on slower but more orderly and sustainable growth to drive cash flow and profits. In Feb 2017, Lennar took over WCI Communities, Inc. With a portfolio of high quality, low cost land and 51 communities, the integration is expected to produce strong gross margin going forward.
The company was successful in achieving the lowest SG&A percentage in its history in 2016 and continued the trend in the first quarter. It plans to reduce SG&A expenses to the range of 9.1%–9.3% in 2017.
However, labor shortages, gross margin compression due to rising land and labor costs and a further increase in interest rates can somewhat keep the housing momentum in check.
Other Stocks to Consider
Other top-ranked stocks in the industry include Lyon William Homes , M/I Homes, Inc. (MHO - Free Report) and KB Home (KBH - Free Report) .
Lyon William and M/I Homes sport a Zacks Rank #1 (Strong Buy). Full-year 2017 earnings for Lyon William are expected to increase 38.2% while that of M/I Homes is likely to rise 36.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home, a Zacks Rank #2 stock, is expected to witness 43.2% growth in fiscal 2017 earnings.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Lennar (LEN) Now a Buy on Positive Housing Market Outlook
On May 23, we upgraded Lennar Corporation (LEN - Free Report) by a notch to a Zacks Rank #2 (Buy).
.jpg)
Lennar is one of the best positioned homebuilders to capitalize on the housing recovery, courtesy of its diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage.
Though Lennar’s shares have gained 22.1% year to date, marginally underperforming the 24.3% growth of the Zacks categorized Building-Residential/Commercial industry, estimates have moved up.
Current year estimates rose 1.9%, reflecting seven upward and one downward revision in the past 60 days. Next year estimates moved up 6.2%, reflecting seven upward and no downward revision in the same time frame. Also, Lennar surpassed earnings in all of the past four quarters at an average of 8.7%. Diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage should drive the stock’s performance, moving ahead.
Thanks to strong demand in housing, Lennar started 2017 on a strong performance, beating the Zacks Consensus Estimate for both earnings and sales in the first quarter. Homebuilding revenues rose 12.8% in the first quarter, backed by an increase in home deliveries and consistent average selling price. Lennar’s core homebuilding results remain consistent with the “slow and steady” housing recovery.
Steady job and wage growth, a recovering economy, moderating home price gains, historically low interest/mortgage rates, rising rentals, rapidly increasing household formation and a limited supply of inventory point at strong housing demand in 2017.
Meanwhile, Lennar has strategically shifted from a land heavy acquisition strategy to acquiring lands with a shorter two to three-year average life. The company is presently focusing on slower but more orderly and sustainable growth to drive cash flow and profits. In Feb 2017, Lennar took over WCI Communities, Inc. With a portfolio of high quality, low cost land and 51 communities, the integration is expected to produce strong gross margin going forward.
The company was successful in achieving the lowest SG&A percentage in its history in 2016 and continued the trend in the first quarter. It plans to reduce SG&A expenses to the range of 9.1%–9.3% in 2017.
However, labor shortages, gross margin compression due to rising land and labor costs and a further increase in interest rates can somewhat keep the housing momentum in check.
Other Stocks to Consider
Other top-ranked stocks in the industry include Lyon William Homes , M/I Homes, Inc. (MHO - Free Report) and KB Home (KBH - Free Report) .
Lyon William and M/I Homes sport a Zacks Rank #1 (Strong Buy). Full-year 2017 earnings for Lyon William are expected to increase 38.2% while that of M/I Homes is likely to rise 36.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home, a Zacks Rank #2 stock, is expected to witness 43.2% growth in fiscal 2017 earnings.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>