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Why Is Lennar (LEN) Up 16.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Lennar (LEN - Free Report) . Shares have added about 16.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Lennar (LEN - Free Report) Q1 Earnings Top Estimates, View Up
Lennar Corporation reported better-than-expected results for first-quarter fiscal 2021 (ended Feb 28, 2021). The quarterly results benefited from robust housing market fundamentals backed by low interest rates (which inched a bit higher in recent times), a solid stimulus package, and persistent undersupply of new as well as existing inventory. Also, solid execution of homebuilding and financial services businesses added to its bliss.
The company reported adjusted quarterly earnings of $2.04 per share, handily surpassing the Zacks Consensus Estimate of $1.65 by 23.6%. In the year-ago period, it reported earnings of $1.27 per share. This marked the eighth consecutive quarter of an earnings beat. The results mainly benefited from higher revenues, effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage.
Revenues of $5.33 billion topped the consensus mark of $5.08 billion by 4.9%. The reported figure also grew 18.2% year over year.
Segment Details
Homebuilding: Revenues at the segment totaled $4.94 billion, up 18.5% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $4.89 billion to total revenues, up 18.1% from a year ago. However, land sales accounted for $47.6 million, up 77.3% from the prior-year quarter. Higher home sales were due to increased new home deliveries.
Home deliveries for the reported quarter improved 19% from the year-ago level to 12,302 units. The average sales price of homes delivered was $398,000 compared with $402,000 in the year-ago figure.
New orders grew 26% from the year-ago quarter to 15,570 homes. Potential value of net orders also increased 31% year over year to $6.5 billion.
Backlog at fiscal first quarter-end climbed up 25% from a year ago to 22,077. Potential housing revenues from backlog also advanced 32% year over year to $9.5 billion.
Homebuilding Margins
Gross margin on home sales was 25% for the quarter, up 450 bps. The upside can be attributed to its efforts toward reducing construction costs and a solid housing market scenario.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — improved 80 bps to 8.4% on improved operating leverage, given benefits from the company's technology efforts. Notably, this marks the lowest percentage for a first quarter in Lennar’s history.
Homebuilding operating earnings of $833.2 million for the quarter increased 81% from the year-ago period.
Financial Services: The segment’s revenues increased 22.9% year over year to $244.1 million for the reported quarter. Operating earnings came in at $146.2 million, up 209% from a year ago on strong mortgage business owing to higher volumes and margins.
Lennar Multi-Family: Revenues of $131.4 million at the segment were down 0.9% from the prior-year quarter. Also, the segment incurred operating loss of $0.9 million for the quarter versus operating earnings of $1.8 million a year ago.
Lennar Other: The segment’s revenues totaled $6.9 million, up from $1.9 million a year ago. Operating earnings were $471.3 million for the quarter versus $0.9 million in the comparable period of 2020.
Financials
Lennar had homebuilding cash and cash equivalents of $2.4 billion as of Feb 28, 2021, down from $2.7 billion on Nov 30, 2020. Total homebuilding debt was $5.98 billion as of Feb 28, 2021, slightly up from $5.96 billion on Nov 30, 2020. Homebuilding debt to capital at fiscal first quarter-end was 24% compared with 24.9% at fiscal 2020-end.
The company has no outstanding borrowings under the $2.5-billion revolving credit facility, thereby providing $4.9 billion of available capacity.
Guidance
For second-quarter fiscal 2021, Lennar expects deliveries in the range of 14,200-14,400 homes; ASP within $405,000; homebuilding gross margin to be 25%; and homebuilding SG&A of 7.9-8%. New orders are expected within 16,500-16,700.
For fiscal 2021, it expects deliveries in the range of 62,000-64,000 homes; ASP within $400,000 ($386,000-$388,000 expected earlier); homebuilding gross margin to be 25% (versus 23.75-24% projected earlier); and homebuilding SG&A of 7.6-7.8% (versus 7.8-8% earlier expected).
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.07% due to these changes.
VGM Scores
At this time, Lennar has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lennar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Lennar (LEN) Up 16.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Lennar (LEN - Free Report) . Shares have added about 16.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Lennar (LEN - Free Report) Q1 Earnings Top Estimates, View Up
Lennar Corporation reported better-than-expected results for first-quarter fiscal 2021 (ended Feb 28, 2021). The quarterly results benefited from robust housing market fundamentals backed by low interest rates (which inched a bit higher in recent times), a solid stimulus package, and persistent undersupply of new as well as existing inventory. Also, solid execution of homebuilding and financial services businesses added to its bliss.
The company reported adjusted quarterly earnings of $2.04 per share, handily surpassing the Zacks Consensus Estimate of $1.65 by 23.6%. In the year-ago period, it reported earnings of $1.27 per share. This marked the eighth consecutive quarter of an earnings beat. The results mainly benefited from higher revenues, effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage.
Revenues of $5.33 billion topped the consensus mark of $5.08 billion by 4.9%. The reported figure also grew 18.2% year over year.
Segment Details
Homebuilding: Revenues at the segment totaled $4.94 billion, up 18.5% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $4.89 billion to total revenues, up 18.1% from a year ago. However, land sales accounted for $47.6 million, up 77.3% from the prior-year quarter. Higher home sales were due to increased new home deliveries.
Home deliveries for the reported quarter improved 19% from the year-ago level to 12,302 units. The average sales price of homes delivered was $398,000 compared with $402,000 in the year-ago figure.
New orders grew 26% from the year-ago quarter to 15,570 homes. Potential value of net orders also increased 31% year over year to $6.5 billion.
Backlog at fiscal first quarter-end climbed up 25% from a year ago to 22,077. Potential housing revenues from backlog also advanced 32% year over year to $9.5 billion.
Homebuilding Margins
Gross margin on home sales was 25% for the quarter, up 450 bps. The upside can be attributed to its efforts toward reducing construction costs and a solid housing market scenario.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — improved 80 bps to 8.4% on improved operating leverage, given benefits from the company's technology efforts. Notably, this marks the lowest percentage for a first quarter in Lennar’s history.
Homebuilding operating earnings of $833.2 million for the quarter increased 81% from the year-ago period.
Financial Services: The segment’s revenues increased 22.9% year over year to $244.1 million for the reported quarter. Operating earnings came in at $146.2 million, up 209% from a year ago on strong mortgage business owing to higher volumes and margins.
Lennar Multi-Family: Revenues of $131.4 million at the segment were down 0.9% from the prior-year quarter. Also, the segment incurred operating loss of $0.9 million for the quarter versus operating earnings of $1.8 million a year ago.
Lennar Other: The segment’s revenues totaled $6.9 million, up from $1.9 million a year ago. Operating earnings were $471.3 million for the quarter versus $0.9 million in the comparable period of 2020.
Financials
Lennar had homebuilding cash and cash equivalents of $2.4 billion as of Feb 28, 2021, down from $2.7 billion on Nov 30, 2020. Total homebuilding debt was $5.98 billion as of Feb 28, 2021, slightly up from $5.96 billion on Nov 30, 2020. Homebuilding debt to capital at fiscal first quarter-end was 24% compared with 24.9% at fiscal 2020-end.
The company has no outstanding borrowings under the $2.5-billion revolving credit facility, thereby providing $4.9 billion of available capacity.
Guidance
For second-quarter fiscal 2021, Lennar expects deliveries in the range of 14,200-14,400 homes; ASP within $405,000; homebuilding gross margin to be 25%; and homebuilding SG&A of 7.9-8%. New orders are expected within 16,500-16,700.
For fiscal 2021, it expects deliveries in the range of 62,000-64,000 homes; ASP within $400,000 ($386,000-$388,000 expected earlier); homebuilding gross margin to be 25% (versus 23.75-24% projected earlier); and homebuilding SG&A of 7.6-7.8% (versus 7.8-8% earlier expected).
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.07% due to these changes.
VGM Scores
At this time, Lennar has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lennar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.