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Lennar (LEN) to Report Q2 Earnings: What's in the Cards?

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Lennar Corporation (LEN - Free Report) is slated to report results for second-quarter fiscal 2021 (ended May 31) after the closing bell on Jun 16.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 23.6% and 4.9%, respectively. Notably, this Miami-based homebuilder surpassed earnings expectations in 12 of the trailing 13 quarters.

On a year-over-year basis, earnings and revenues grew 60.6% and 18.2%, respectively.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has increased 4.5% to $2.34 over the past 60 days. The estimated figure indicates an increase of 56% from $1.50 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $6.16 billion, suggesting a 16.6% increase from the year-ago reported figure of $5.29 billion.

Let’s see how things have shaped up for this announcement.

Lennar Corporation Price and EPS Surprise

Lennar Corporation Price and EPS Surprise

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

Factors to Note

Lennar’s fiscal second-quarter Homebuilding revenues (accounting for more than 93% of total revenues) are expected to have improved from the year-ago level due to higher deliveries, given lower borrowing costs, improved economy, more governmental stimulus and vaccination drive.

Overall, lower mortgage rates and demand for affordable housing from multiple demographic groups are likely to have given a boost to its order growth. The company has been shifting the business mix to lower-priced homes. This is expected to have boosted its sales absorption pace to some extent.

The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $5.83 billion, which indicates an increase of 17.8% from the year-ago period.

For the fiscal second quarter, Lennar expects deliveries in the range of 14,200-14,400 homes, indicating an improvement from the year-ago reported figure of 12,672. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 14,278 homes, indicating an increase of 12.7% from a year ago. The company expects average sales price to be $405,000, suggesting an increase from $395,000 a year ago. Lennar also expects new orders in the 16,500-16,700 range, indicating an increase from 13,015 reported in second-quarter fiscal 2020.

From the margin perspective, higher average sales and strong demand are likely to have expanded margins. The company expects homebuilding gross margin to be 25%, pointing to an increase from 21.6% a year ago, mainly on a robust pricing environment.

Lennar has been focusing on controlling construction costs and managing sales price prudently, which may have benefited gross margin in the fiscal first quarter.

Again, it has been focused on continuous improvement in the homebuilding SG&A (selling, general and administrative) line owing to operating leverage along with investments in technology. The company expects SG&A expenses, as a percentage of home sales, within 7.9-8%. A year ago, the metric was recorded at 8.3%.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Lennar this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Lennar carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +8.88% and holds a Zacks Rank #3.

KB Home (KBH - Free Report) has an Earnings ESP of +1.87% and a Zacks Rank #2.

Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +3.48% and a Zacks Rank #3.

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Quanta Services, Inc. (PWR) - free report >>

Vulcan Materials Company (VMC) - free report >>

KB Home (KBH) - free report >>

Lennar Corporation (LEN) - free report >>