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Lennar (LEN) to Report Q1 Earnings: Key Factors to Note

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Lennar Corporation (LEN - Free Report) is slated to report results for first-quarter fiscal 2022 (ended Nov 30), after the closing bell on Mar 16.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 5.3% but revenues missed the same by 1.2%. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in 15 of the trailing 16 quarters.

On a year-over-year basis, fiscal four-quarter earnings and revenues grew 55% and 23.6%, respectively.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been revised upward by 0.8% to $2.60 over the past 60 days. The estimated figure indicates an increase of 27.5% from $2.04 reported in the year-ago quarter. The consensus mark for revenues is pegged at $6.19 billion, suggesting a 16.2% increase from the year-ago reported figure of $5.33 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

Home sales of this homebuilding company are expected to have increased in the fiscal first quarter from the year-ago level, given resilient housing market conditions in the United States, backed by the lack of available supply and a highly motivated buyer.

Higher deliveries and pricing are expected to have benefited Lennar’s fiscal first-quarter Homebuilding revenues (accounting for more than 93% of total revenues).

The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $5.78 billion, which indicates an increase of 16.9% from the year-ago period.

For the fiscal first quarter, Lennar expects deliveries in the range of 12,500 homes, indicating an improvement from the year-ago reported figure of 12,314. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 12,540 homes, indicating an increase of 1.8% from a year ago. The company expects average sales price at $460,000, suggesting an increase from $397,000 a year ago. Lennar also expects new orders in the 14,800-15,100 range, indicating a decrease from 15,570 reported in first-quarter fiscal 2021.

From the margin perspective, higher sales prices and modest demand are likely to have expanded margins. The company expects homebuilding gross margin at 26.8%, pointing to an increase from 25% a year ago, mainly in a robust pricing environment. Lennar has been focusing on controlling construction costs and prudently managing sales prices, which may have benefited gross margin in the fiscal first quarter.

Again, it has been focused on continuous improvement of the homebuilding selling, general and administrative (SG&A) line owing to operating leverage along with investments in technology. The company expects SG&A expenses, as a percentage of home sales, in the range of 7.8-7.9%%. A year ago, the metric was recorded at 8.4%.

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

Stocks With Favorable Combination

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

Floor & Decor Holdings, Inc. (FND - Free Report) has an Earnings ESP of +0.50% and holds a Zacks Rank #3.

Floor & Decor Holdings is expected to register a 1.5% decline in earnings for the quarter to-be-reported. Notably, FND reported better-than-expected earnings in three of the last four quarters but missed on one occasion, with the average surprise being 11.4%.

Lennox International Inc. (LII - Free Report) has an Earnings ESP of +4.43% and a Zacks Rank #3.

Lennox International is expected to register a 12.3% decline in earnings for the quarter to-be-reported. Notably, the company reported better-than-expected earnings in three of the last four quarters but missed on one occasion, with the average surprise being 23.2%.

Watsco, Inc. (WSO - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2.

Watsco is expected to register 20.9% growth in earnings for the quarter to-be-reported. Notably, the company reported better-than-expected earnings in the last four quarters, with the average surprise being 22.7%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.