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Lennar Corporation’s (LEN - Free Report) shares dropped 7.3% in the after-hours trading session on Dec 15, following its fourth-quarter fiscal 2021 (ended Nov 30, 2021) earnings release. Quarterly earnings topped the Zacks Consensus Estimate but revenues missed the same, thanks to unprecedented supply chain challenges.
Nonetheless, looking forward, Stuart Miller, the executive chairman of Lennar, said, “The housing industry continues to exhibit strong demand, outweighing supply, and we are confident that we will continue to generate solid growth and enhance our current market position. Accordingly, as we look forward to 2022, we expect to deliver approximately 67,000 homes with a 27.0% - 27.5% gross margin for the year, with more or less 12,500 homes at a gross margin of approximately 26.75% in the first quarter. Overall, we are operating from a position of strength with an excellent balance sheet enabling us to continue to execute on our core strategies."
It reported adjusted quarterly earnings of $4.36 per share, surpassing the Zacks Consensus Estimate of $4.14 by 5.3%. This marked the 11th consecutive quarter of an earnings beat. The reported earnings increased 55% year over year, mainly benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage.
Revenues of $8.43 billion missed the consensus mark of $8.54 billion by 1.2%. That said, the reported figure grew 23.6% year over year.
Lennar Corporation Price, Consensus and EPS Surprise
Homebuilding: Revenues at the segment totaled $8.02 billion, up 26% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $7.97 billion to total revenues, up 26.4% from a year ago. Land sales accounted for $36.4 million, down from $42.3 million in the prior-year quarter.
Home deliveries for the reported quarter improved 11% from the year-ago level to 17,819 units. The average sales price of homes delivered was $448,000, up 14% from the year-ago figure.
New orders grew 2% from the year-ago quarter to 15,539 homes. The potential value of net orders also increased 16% year over year to $7.3 billion.
Backlog at fiscal 2021-end climbed 26% from a year ago to 23,771. Potential housing revenues from backlog also advanced 45% year over year to $11.4 billion.
Homebuilding Margins
Gross margin on home sales was 28% for the quarter, up 300 basis points (bps). The upside can be attributed to pricing power, its efforts toward reducing construction costs and lower interest expense.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — improved 150 bps to 6% on improved operating leverage, given benefits from the company's technology efforts and a decrease in broker commissions. This marks the lowest percentage for a quarter in Lennar’s history.
Homebuilding operating earnings of $1.76 billion for the quarter increased from the year-ago level of $1.08 billion.
Financial Services: The segment’s revenues decreased 11.4% year over year to $229 million for the reported quarter. Operating earnings for the quarter also declined from a year ago owing to lower mortgage net margins, given an increase in competition.
Lennar Multi-Family: Revenues of $188.4 million at the segment were down 8.3% from the prior-year quarter. The segment incurred operating earnings of $9.3 million for the quarter versus $26.7 million a year ago.
Lennar Other: The segment’s revenues totaled $0.6 million, down from $7.7 million a year ago. The segment’s operating loss was $176.2 million for the quarter versus $1.2 million in the comparable period of 2020.
Fiscal 2021 Highlights
Earnings came in at $13.00 per share, up 66% from the year-ago period. Revenues were $27.1 billion, up from $22.5 billion a year ago on higher deliveries and ASPs. The company delivered 59,825 homes during the year, reflecting an increase of 13% from fiscal 2020. It sold homes for $424,000, up 8% year over year. Gross margin expanded 400 bps and the SG&A ratio improved 100 bps during the period.
Financials
Lennar had homebuilding cash and cash equivalents of $2.74 billion as of Nov 30, 2021, slightly up from $2.7 billion on Nov 30, 2020. Total homebuilding debt was $4.65 billion as of Nov 30, 2021, down from $5.96 billion on Nov 30, 2020. Homebuilding debt to capital at fiscal 2021-end was 18.3% (an all-time company low) compared with 24.9% at fiscal 2020-end.
LEN has no outstanding borrowings under the $2.5-billion revolving credit facility, thereby providing $5.2 billion of available capacity. Its continuous focus on the land lighter model resulted in incremental cash flow generation during the fiscal fourth quarter. Lennar used it for repurchasing 10 million shares for just under $1 billion and debt reduction of $850 million. These resulted in a return on equity of more than 22%.
Guidance
For fiscal 2022, Lennar expects deliveries of 67,000 homes and homebuilding gross margin to be 27-27.5%. ASP is projected at $460,000. SG&A expenses, as a percentage of home sales, are likely to be 6.8-6.9% for the year.
For the fiscal first quarter, it expects deliveries to be 12,500 homes, with a gross margin of 26.75%. New orders are likely to be between 14,800 and 15,100 units, and ASP is projected at $460,000. SG&A expenses, as a percentage of home sales, are likely to be 7.8-7.9% for the quarter.
Beazer Homes USA, Inc. (BZH - Free Report) currently sports a Zacks Rank #1. This Atlanta-based homebuilder continues to gain from strong operational execution and continued strength in the housing market.
Beazer Homes has gained 47.8% year to date (YTD). Earnings are expected to grow 23.7% in fiscal 2022.
Meritage Homes Corporation (MTH - Free Report) currently sports a Zacks Rank #1. Based in Scottsdale, AZ, Meritage Homes is one of the leading designers and builders of single-family homes. Its focus on entry-level LiVE.NOW homes has been a major driving factor.
Meritage Homes has gained 43.9% YTD. Earnings are expected to grow 74.4% in 2021 and 22.2% in the next.
TRI Pointe Group Inc. (TPH - Free Report) currently carries a Zacks Rank #1. This Irvine, CA-based homebuilder designs, constructs, and sells single-family detached and attached homes in the United States. Robust demand and pricing as well as improved operating leverage have been driving TRI Pointe's performance. Cost-cutting initiatives implemented earlier this year and focus on entry-level buyers have been adding to the positives.
TRI Pointe has gained 58.3% YTD. Earnings for 2021 and 2022 are expected to grow 80.2% and 9.6%, respectively.
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Lennar (LEN) Q4 Earnings Top, Revenues Miss, Shares Tumble
Lennar Corporation’s (LEN - Free Report) shares dropped 7.3% in the after-hours trading session on Dec 15, following its fourth-quarter fiscal 2021 (ended Nov 30, 2021) earnings release. Quarterly earnings topped the Zacks Consensus Estimate but revenues missed the same, thanks to unprecedented supply chain challenges.
Nonetheless, looking forward, Stuart Miller, the executive chairman of Lennar, said, “The housing industry continues to exhibit strong demand, outweighing supply, and we are confident that we will continue to generate solid growth and enhance our current market position. Accordingly, as we look forward to 2022, we expect to deliver approximately 67,000 homes with a 27.0% - 27.5% gross margin for the year, with more or less 12,500 homes at a gross margin of approximately 26.75% in the first quarter. Overall, we are operating from a position of strength with an excellent balance sheet enabling us to continue to execute on our core strategies."
It reported adjusted quarterly earnings of $4.36 per share, surpassing the Zacks Consensus Estimate of $4.14 by 5.3%. This marked the 11th consecutive quarter of an earnings beat. The reported earnings increased 55% year over year, mainly benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage.
Revenues of $8.43 billion missed the consensus mark of $8.54 billion by 1.2%. That said, the reported figure grew 23.6% year over year.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Segment Details
Homebuilding: Revenues at the segment totaled $8.02 billion, up 26% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $7.97 billion to total revenues, up 26.4% from a year ago. Land sales accounted for $36.4 million, down from $42.3 million in the prior-year quarter.
Home deliveries for the reported quarter improved 11% from the year-ago level to 17,819 units. The average sales price of homes delivered was $448,000, up 14% from the year-ago figure.
New orders grew 2% from the year-ago quarter to 15,539 homes. The potential value of net orders also increased 16% year over year to $7.3 billion.
Backlog at fiscal 2021-end climbed 26% from a year ago to 23,771. Potential housing revenues from backlog also advanced 45% year over year to $11.4 billion.
Homebuilding Margins
Gross margin on home sales was 28% for the quarter, up 300 basis points (bps). The upside can be attributed to pricing power, its efforts toward reducing construction costs and lower interest expense.
Selling, general and administrative or SG&A expenses — as a percentage of home sales — improved 150 bps to 6% on improved operating leverage, given benefits from the company's technology efforts and a decrease in broker commissions. This marks the lowest percentage for a quarter in Lennar’s history.
Homebuilding operating earnings of $1.76 billion for the quarter increased from the year-ago level of $1.08 billion.
Financial Services: The segment’s revenues decreased 11.4% year over year to $229 million for the reported quarter. Operating earnings for the quarter also declined from a year ago owing to lower mortgage net margins, given an increase in competition.
Lennar Multi-Family: Revenues of $188.4 million at the segment were down 8.3% from the prior-year quarter. The segment incurred operating earnings of $9.3 million for the quarter versus $26.7 million a year ago.
Lennar Other: The segment’s revenues totaled $0.6 million, down from $7.7 million a year ago. The segment’s operating loss was $176.2 million for the quarter versus $1.2 million in the comparable period of 2020.
Fiscal 2021 Highlights
Earnings came in at $13.00 per share, up 66% from the year-ago period. Revenues were $27.1 billion, up from $22.5 billion a year ago on higher deliveries and ASPs. The company delivered 59,825 homes during the year, reflecting an increase of 13% from fiscal 2020. It sold homes for $424,000, up 8% year over year. Gross margin expanded 400 bps and the SG&A ratio improved 100 bps during the period.
Financials
Lennar had homebuilding cash and cash equivalents of $2.74 billion as of Nov 30, 2021, slightly up from $2.7 billion on Nov 30, 2020. Total homebuilding debt was $4.65 billion as of Nov 30, 2021, down from $5.96 billion on Nov 30, 2020. Homebuilding debt to capital at fiscal 2021-end was 18.3% (an all-time company low) compared with 24.9% at fiscal 2020-end.
LEN has no outstanding borrowings under the $2.5-billion revolving credit facility, thereby providing $5.2 billion of available capacity. Its continuous focus on the land lighter model resulted in incremental cash flow generation during the fiscal fourth quarter. Lennar used it for repurchasing 10 million shares for just under $1 billion and debt reduction of $850 million. These resulted in a return on equity of more than 22%.
Guidance
For fiscal 2022, Lennar expects deliveries of 67,000 homes and homebuilding gross margin to be 27-27.5%. ASP is projected at $460,000. SG&A expenses, as a percentage of home sales, are likely to be 6.8-6.9% for the year.
For the fiscal first quarter, it expects deliveries to be 12,500 homes, with a gross margin of 26.75%. New orders are likely to be between 14,800 and 15,100 units, and ASP is projected at $460,000. SG&A expenses, as a percentage of home sales, are likely to be 7.8-7.9% for the quarter.
Zacks Rank
Lennar currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Top-Ranked Stocks From the Same Industry
Beazer Homes USA, Inc. (BZH - Free Report) currently sports a Zacks Rank #1. This Atlanta-based homebuilder continues to gain from strong operational execution and continued strength in the housing market.
Beazer Homes has gained 47.8% year to date (YTD). Earnings are expected to grow 23.7% in fiscal 2022.
Meritage Homes Corporation (MTH - Free Report) currently sports a Zacks Rank #1. Based in Scottsdale, AZ, Meritage Homes is one of the leading designers and builders of single-family homes. Its focus on entry-level LiVE.NOW homes has been a major driving factor.
Meritage Homes has gained 43.9% YTD. Earnings are expected to grow 74.4% in 2021 and 22.2% in the next.
TRI Pointe Group Inc. (TPH - Free Report) currently carries a Zacks Rank #1. This Irvine, CA-based homebuilder designs, constructs, and sells single-family detached and attached homes in the United States. Robust demand and pricing as well as improved operating leverage have been driving TRI Pointe's performance. Cost-cutting initiatives implemented earlier this year and focus on entry-level buyers have been adding to the positives.
TRI Pointe has gained 58.3% YTD. Earnings for 2021 and 2022 are expected to grow 80.2% and 9.6%, respectively.