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Lennar is gaining momentum from the fast improving housing fundamentals. With housing recovery, there has been a drop in inventory levels and an increase in home prices.
Third Quarter 2012 Recap
Lennar Corporation reported adjusted earnings (excluding income tax adjustments) of 34 cents per share in the third quarter of fiscal 2012, beating the Zacks Consensus Estimate by 25.9%. Earnings also skyrocketed 209% from the prior-year quarter. Earnings growth was driven by improved homebuilding revenues and solid operating margins.
Total revenue in the quarter climbed 34% to $1.1 billion, driven by pricing and volume growth in a stabilizing housing market. Revenues also surpassed the Zacks Consensus Estimate of $1.03 billion.
Lennar has witnessed solid year-over-year growth in new home orders, average selling prices and home closings in all the three quarters of 2012. Margins have also been above average, despite rising costs, driven by strong operating leverage. Lennar appears confident of significant growth in the rest of the fiscal year and thereafter.
Lennar has delivered positive earnings surprises in all the quarters of 2012 with an impressive average earnings surprise of 27.4% in the trailing four quarters.
We believe that the company is performing better than its peers by increasing sales prices, reducing incentives, improving volumes and by making opportunistic land acquisitions. Moreover, Lennar’s focus on the quality of communities instead of quantity also benefits its margins and new sales orders.
Other Stocks to Consider
With the housing market recovering steadily, many other stocks in the homebuilding sector are currently performing well. These include PulteGroup, Inc. (PHM - Analyst Report) – Zacks #2 Rank (Buy), The Ryland Group, Inc. (RYL - Snapshot Report) – Zacks #1 Rank (Strong Buy) and Meritage Homes Corporation (MTH - Snapshot Report) – Zacks #2 Rank (Buy).
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