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Lennar (LEN) Q3 Earnings Beat, Revenues Miss, Demand Strong

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Lennar Corporation’s (LEN - Free Report) shares rose by a meager 0.7% on Sep 21, following its third-quarter fiscal 2022 (ended May 31, 2022) earnings release. Quarterly earnings topped the Zacks Consensus Estimate but revenues missed the same amid rising interest rates.

Pertaining to the quarterly release, Stuart Miller, executive chairman of Lennar, said, "While our new orders declined 12% compared to last year's third quarter, we continued to maintain a consistent starts pace and drive sales by adjusting pricing and incentives. Sales have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and demand remains strong as we navigate the rebalance between price and interest rates."

Quarterly Numbers

LEN reported adjusted quarterly earnings (excluding mark-to-market gains and losses in both years) of $5.18 per share, surpassing the Zacks Consensus Estimate of $4.76. This marked the 14th consecutive quarter of an earnings beat. Reported earnings also increased 58.4% year over year, mainly benefiting from effective cost control and focus on making its homebuilding platform more efficient, which resulted in higher operating leverage.

Revenues of $8.93 billion missed the consensus mark of $9.04 billion. The reported figure, however, grew 28.7% year over year.

Lennar Corporation Price, Consensus and EPS Surprise

Lennar Corporation Price, Consensus and EPS Surprise

Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote

Segment Details

Homebuilding: The revenues of the segment totaled $8.48 billion, up 29.3% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $8.44 billion to total revenues, up 29.7% from a year ago. Land sales accounted for $32.4 million, down from $45.1 million in the prior-year quarter. The Other homebuilding unit contributed $7.97 million to homebuilding revenues, up from $7.74 million a year ago.

Home deliveries for the reported quarter improved 13% from the year-ago level to 17,248 units. Notably, supply-chain constraints are improving but continue to limit deliveries. The average sales price of homes delivered was $491,000, up 15% from the year-ago figure.

New orders declined 12% from the year-ago quarter to 14,366 homes. The potential value of net orders also decreased 11% year over year to $6.7 billion.

Backlog at the fiscal third-quarter end declined 0.3% from a year ago to 25,734. Potential housing revenues from backlog advanced 8% year over year to $12.89 billion.

Homebuilding Margins

The gross margin on home sales was 29.2% for the quarter, up 190 basis points (bps). The upside can be attributed to higher revenues per square foot, flat land costs, its efforts toward reducing construction costs and lower interest expenses.

Selling, general and administrative or SG&A expenses — as a percentage of home sales — improved 120 bps to 5.8% on improved operating leverage, given the benefits from a decrease in broker commissions and the company's technology efforts. This marks the lowest percentage for any quarter in Lennar’s history.

Homebuilding operating earnings of $1.96 billion for the quarter increased from the year-ago level of $1.33 billion.

Financial Services: The segment’s revenues decreased year over year to $202.1 million from $207 million for the reported quarter. Operating earnings for the quarter also declined to $63.3 million from $112.1 million a year ago, owing to lower mortgage net margins, given the stiff competition.

Lennar Multi-Family: Revenues of $243.1 million in the segment were up from $167.9 million in the prior-year quarter. The segment registered operating earnings of $48.5 million for the quarter compared with a loss of $9.4 million a year ago.

Lennar Other: The segment’s revenues totaled $9.8 million, up from $8 million a year ago. The segment’s operating loss was $118 million for the quarter compared with an income of $492 million in the comparable period of 2021.


Lennar had homebuilding cash and cash equivalents of $1.31 billion as of Aug 31, 2022, down from $2.74 billion on Nov 30, 2021. Total homebuilding debt was $4.06 billion as of Aug 31, 2022, down from $4.65 billion at the fiscal 2021-end. Homebuilding debt to capital at the fiscal third-quarter end was 15%, down from 18.3% at the fiscal 2021-end.

LEN has no outstanding borrowings under the $2.575 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

Lennar repurchased 9.4 million shares for $846.9 million during the first nine months of fiscal 2021.


For the fiscal fourth quarter, it expects deliveries within 20,000-21,000 homes, with a gross margin on home sales of 26-27%. New orders are likely to be between 16,000 and 18,000 units, and ASP is expected to be between $475,000 and $480,000. SG&A expenses, as a percentage of home sales, are likely to be 5.7-5.9% for the quarter.

Zacks Rank

Lennar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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