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Lennar (LEN) Outperforms Industry YTD: More Room to Run?
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There’s no denying that record high prices have been pushing potential buyers away despite a low borrowing rate environment, thereby resulting in tepid home sales for May.
Nonetheless, a major U.S. single-family homebuilder Lennar Corporation (LEN - Free Report) is delivering strong performance backed by strategic initiatives and robust backlog level.
The company’s shares have gained 30.9% year to date, steadily outperforming the Zacks Building Products - Home Builders industry’s 19.4% rally and other industry biggies like NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) , and Meritage Homes Corporation (MTH - Free Report) . Also, it has outperformed the S&P 500’s 16.5% rise in the said period. The solid performance can be attributed to an impressive earnings surprise trend and solid industry backdrop. Lennar’s earnings surpassed the Zacks Consensus Estimate in all the trailing nine quarters.
Also, earnings estimates for fiscal 2021 and 2022 have moved up 16.1% and 26.6%, respectively, over the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
What Makes the Stock an Attractive Pick?
Stellar Performance: Lennar, which has been continuously delivering strong performances since fiscal 2014, maintained growth momentum in the first two quarters of fiscal 2021 as well. New single-family home demand has seen a V-shaped recovery throughout the country amid widespread stay-at-home orders and Lennar has been in a prime position to benefit from the same. Lower interest rates have helped the company deliver a solid performance.
For second-quarter fiscal 2021, Lennar reported impressive results as both the top and bottom lines topped analysts’ expectation as well as improved year over year. The quarterly results benefited from solid execution of homebuilding and financial services businesses. Also, robust housing market conditions added to its bliss. Home deliveries improved 14% from the year-ago level. A similar picture is portrayed in first-quarter fiscal 2021. Deliveries in the fiscal first quarter were up 19% from a year ago to 12,302 homes.
SG&A Leverage: The company remained focused on achieving lower SG&A percentage in order to drive the bottom line as well as cash flow. In fact, second-quarter fiscal 2021 SG&A expenses — as a percentage of revenues from home sales — of 7.6% marks the lowest percentage for a quarter in Lennar’s history. This was due to improved operating leverage as a result of an increase in home deliveries and continued benefits from technology initiatives.
Dynamic Pricing Model: The company is using the dynamic pricing model, which enables it to set price according to the evolving market conditions. Courtesy of this strategy, Lennar has been taking advantage of the strong demand trend, which is helping it maximize cash flow and return on inventory. The average sales price of homes delivered was $414,000 for second-quarter fiscal 2021 compared with $389,000 in the year-ago figure.
Impressive Fiscal Q3 View: Lennar, during fiscal second-quarter earnings call, has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. The company has been benefiting from higher revenues, effective cost control and focus on making the homebuilding platform more efficient, which in turn resulted in increased operating leverage.
Robust Backlog: Backed by the above-mentioned tailwinds, Lennar ended second-quarter fiscal 2021 with a backlog of 24,741 homes (up 38% year over year) and potential housing revenues of $11 billion (up 56%). The company is well positioned to deliver solid results for fiscal 2021, given strong backlog and current housing fundamentals.
Solid Growth Rate: Lennar has solid prospects, as is evident from the Zacks Consensus Estimate for earnings of $13.61 per share for the current year, indicating 73.4% year-over-year growth. Meanwhile, the company’s sales are expected to increase 27.1% for the current year.
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Image: Bigstock
Lennar (LEN) Outperforms Industry YTD: More Room to Run?
There’s no denying that record high prices have been pushing potential buyers away despite a low borrowing rate environment, thereby resulting in tepid home sales for May.
Nonetheless, a major U.S. single-family homebuilder Lennar Corporation (LEN - Free Report) is delivering strong performance backed by strategic initiatives and robust backlog level.
The company’s shares have gained 30.9% year to date, steadily outperforming the Zacks Building Products - Home Builders industry’s 19.4% rally and other industry biggies like NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) , and Meritage Homes Corporation (MTH - Free Report) . Also, it has outperformed the S&P 500’s 16.5% rise in the said period. The solid performance can be attributed to an impressive earnings surprise trend and solid industry backdrop. Lennar’s earnings surpassed the Zacks Consensus Estimate in all the trailing nine quarters.
Also, earnings estimates for fiscal 2021 and 2022 have moved up 16.1% and 26.6%, respectively, over the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
What Makes the Stock an Attractive Pick?
Stellar Performance: Lennar, which has been continuously delivering strong performances since fiscal 2014, maintained growth momentum in the first two quarters of fiscal 2021 as well. New single-family home demand has seen a V-shaped recovery throughout the country amid widespread stay-at-home orders and Lennar has been in a prime position to benefit from the same. Lower interest rates have helped the company deliver a solid performance.
For second-quarter fiscal 2021, Lennar reported impressive results as both the top and bottom lines topped analysts’ expectation as well as improved year over year. The quarterly results benefited from solid execution of homebuilding and financial services businesses. Also, robust housing market conditions added to its bliss. Home deliveries improved 14% from the year-ago level. A similar picture is portrayed in first-quarter fiscal 2021. Deliveries in the fiscal first quarter were up 19% from a year ago to 12,302 homes.
SG&A Leverage: The company remained focused on achieving lower SG&A percentage in order to drive the bottom line as well as cash flow. In fact, second-quarter fiscal 2021 SG&A expenses — as a percentage of revenues from home sales — of 7.6% marks the lowest percentage for a quarter in Lennar’s history. This was due to improved operating leverage as a result of an increase in home deliveries and continued benefits from technology initiatives.
Dynamic Pricing Model: The company is using the dynamic pricing model, which enables it to set price according to the evolving market conditions. Courtesy of this strategy, Lennar has been taking advantage of the strong demand trend, which is helping it maximize cash flow and return on inventory. The average sales price of homes delivered was $414,000 for second-quarter fiscal 2021 compared with $389,000 in the year-ago figure.
Impressive Fiscal Q3 View: Lennar, during fiscal second-quarter earnings call, has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. The company has been benefiting from higher revenues, effective cost control and focus on making the homebuilding platform more efficient, which in turn resulted in increased operating leverage.
Robust Backlog: Backed by the above-mentioned tailwinds, Lennar ended second-quarter fiscal 2021 with a backlog of 24,741 homes (up 38% year over year) and potential housing revenues of $11 billion (up 56%). The company is well positioned to deliver solid results for fiscal 2021, given strong backlog and current housing fundamentals.
Solid Growth Rate: Lennar has solid prospects, as is evident from the Zacks Consensus Estimate for earnings of $13.61 per share for the current year, indicating 73.4% year-over-year growth. Meanwhile, the company’s sales are expected to increase 27.1% for the current year.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>