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Lennar (LEN) to Gain From Improving Demand Amid Supply Shortage
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The U.S. housing industry has been witnessing signs of improvement of late. Builders are gaining confidence from the shortage of existing homes in the sector, which is improving demand conditions. Lennar Corporation (LEN - Free Report) , one of the top homebuilders in the United States, also has an optimistic view for the second half of fiscal 2023.
Recently, it delivered impressive results for second-quarter fiscal 2023, where earnings and revenues handily beat the Zacks Consensus Estimate. Although results were down for major metrics due to difficult year-over-year comparisons, the company expects solid third-quarter and fiscal 2023 deliveries and orders.
On a positive note, Lennar has undertaken various price actions and cost-saving moves that are helping it mitigate macroeconomic woes. Also, digital marketing platforms, a land-lighter strategy and a dynamic pricing model bode well. Strong liquidity positions Lennar well for the future.
LEN has adopted a price-to-market strategy, which means the company is continuously searching for market-clearing price for each of its homes on a community-by-community basis.
Let’s check the factors supporting this Zacks Rank #2 (Buy) company’s growth potential.
Solid Q3 & FY’23 Guidance
For third-quarter fiscal 2023, Lennar expects deliveries within 17,750-18,250 homes compared with 17,248 units reported a year ago. New orders are likely to be between 18,000 and 19,000 units (significantly up from 14,366 units posted a year ago) and the average selling price is expected to be similar to the fiscal second quarter.
Financial Services’ operating earnings are expected to be in the range of $100-$105 million, up from $63 million generated in the prior-year period.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier). The new projection is strong compared with the previous year’s reading of 66,399 homes.
Impressive Builders’ Sentiment Level
After being hurt by significant inflation and labor shortages, strikingly high-interest rates and production deficits, homebuilders are regaining strength since the beginning of 2023. The recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for June also reflects signs of recovery. Builder confidence for newly-built single-family homes rose five points to 55 in June from May.
This was the first time in the last 11 months that the HMI was above mid-point, backed by a lack of existing inventory and improving supply chain efficiency. Not only this, but sales expectations for the next six months also increased by six points, reflecting impressive 2024 prospects.
Additional Factors Supporting Lennar
Recently, the Federal Reserve signaled that tight Monetary policy is about to end. Although the cost of financing for builder and developer loans has increased and has become more difficult to obtain, which will ultimately result in lower lot supplies, consumers have come to accept it as a "new normal.". This will definitely aid Lennar in the next few quarters.
Lennar has increasingly integrated its marketing strategy via digital channels. It strategically invests in companies involved in technology initiatives that enhance the homebuying experience, reduce SG&A expenses and boost innovation. A dynamic pricing model, along with an improving digital marketing platform, is expected to drive sales volume and maintain consistent production levels.
Moreover, LEN is mainly focused on becoming a pure-play homebuilder and a financial services company. To this end, it plans to spin off all or parts of non-core businesses and create a joint venture to provide single-family homes for rent. The company will now be an asset-light asset management business with a limited balance sheet.
Other Key Picks
Beazer Homes USA (BZH - Free Report) designs, constructs and sells single-family and multi-family homes under the Beazer Homes, Gatherings and Choice Plans names.
BZH shares have gained 7.9% in a month. Its 2023 earnings per share have increased to $3.95 per share from $3.56 over the past 60 days, respectively. It carries an impressive VGM Score of A.
PulteGroup Inc. (PHM - Free Report) has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
PulteGroup, presently flaunting a Zacks Rank #1, has jumped 9% in a month. The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised by 1% over the past seven days. Its earnings topped consensus estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 15.6%. It carries an impressive VGM Score of A.
Toll Brothers, Inc. (TOL - Free Report) has been gaining from the lack of competition in the luxury new home market, its build-to-order approach and a solid backlog level. This, combined with its policy of boosting its supply of spec homes into the spring selling season and focusing on operational efficiency, has been driving growth.
TOL, currently sporting a Zacks Rank #1, has gained 13.6% in a month. It has seen an upward estimate revision for 2023 over the past seven days to $10.61 per share from $10.36. Its earnings topped consensus estimates in the trailing four quarters, with the average surprise being 24.4%. It carries an impressive VGM Score of A.
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Lennar (LEN) to Gain From Improving Demand Amid Supply Shortage
The U.S. housing industry has been witnessing signs of improvement of late. Builders are gaining confidence from the shortage of existing homes in the sector, which is improving demand conditions. Lennar Corporation (LEN - Free Report) , one of the top homebuilders in the United States, also has an optimistic view for the second half of fiscal 2023.
Recently, it delivered impressive results for second-quarter fiscal 2023, where earnings and revenues handily beat the Zacks Consensus Estimate. Although results were down for major metrics due to difficult year-over-year comparisons, the company expects solid third-quarter and fiscal 2023 deliveries and orders.
Lennar shares have gained 8.6% in a month in-line with the Zacks Building Products - Home Builders industry.
Image Source: Zacks Investment Research
On a positive note, Lennar has undertaken various price actions and cost-saving moves that are helping it mitigate macroeconomic woes. Also, digital marketing platforms, a land-lighter strategy and a dynamic pricing model bode well. Strong liquidity positions Lennar well for the future.
LEN has adopted a price-to-market strategy, which means the company is continuously searching for market-clearing price for each of its homes on a community-by-community basis.
Let’s check the factors supporting this Zacks Rank #2 (Buy) company’s growth potential.
Solid Q3 & FY’23 Guidance
For third-quarter fiscal 2023, Lennar expects deliveries within 17,750-18,250 homes compared with 17,248 units reported a year ago. New orders are likely to be between 18,000 and 19,000 units (significantly up from 14,366 units posted a year ago) and the average selling price is expected to be similar to the fiscal second quarter.
Financial Services’ operating earnings are expected to be in the range of $100-$105 million, up from $63 million generated in the prior-year period.
For fiscal 2023, Lennar projects deliveries between 68,000 and 70,000 (versus 62,000 and 66,000 homes expected earlier). The new projection is strong compared with the previous year’s reading of 66,399 homes.
Impressive Builders’ Sentiment Level
After being hurt by significant inflation and labor shortages, strikingly high-interest rates and production deficits, homebuilders are regaining strength since the beginning of 2023. The recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for June also reflects signs of recovery. Builder confidence for newly-built single-family homes rose five points to 55 in June from May.
This was the first time in the last 11 months that the HMI was above mid-point, backed by a lack of existing inventory and improving supply chain efficiency. Not only this, but sales expectations for the next six months also increased by six points, reflecting impressive 2024 prospects.
Additional Factors Supporting Lennar
Recently, the Federal Reserve signaled that tight Monetary policy is about to end. Although the cost of financing for builder and developer loans has increased and has become more difficult to obtain, which will ultimately result in lower lot supplies, consumers have come to accept it as a "new normal.". This will definitely aid Lennar in the next few quarters.
Lennar has increasingly integrated its marketing strategy via digital channels. It strategically invests in companies involved in technology initiatives that enhance the homebuying experience, reduce SG&A expenses and boost innovation. A dynamic pricing model, along with an improving digital marketing platform, is expected to drive sales volume and maintain consistent production levels.
Moreover, LEN is mainly focused on becoming a pure-play homebuilder and a financial services company. To this end, it plans to spin off all or parts of non-core businesses and create a joint venture to provide single-family homes for rent. The company will now be an asset-light asset management business with a limited balance sheet.
Other Key Picks
Beazer Homes USA (BZH - Free Report) designs, constructs and sells single-family and multi-family homes under the Beazer Homes, Gatherings and Choice Plans names.
BZH shares have gained 7.9% in a month. Its 2023 earnings per share have increased to $3.95 per share from $3.56 over the past 60 days, respectively. It carries an impressive VGM Score of A.
BZH currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PulteGroup Inc. (PHM - Free Report) has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
PulteGroup, presently flaunting a Zacks Rank #1, has jumped 9% in a month. The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised by 1% over the past seven days. Its earnings topped consensus estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 15.6%. It carries an impressive VGM Score of A.
Toll Brothers, Inc. (TOL - Free Report) has been gaining from the lack of competition in the luxury new home market, its build-to-order approach and a solid backlog level. This, combined with its policy of boosting its supply of spec homes into the spring selling season and focusing on operational efficiency, has been driving growth.
TOL, currently sporting a Zacks Rank #1, has gained 13.6% in a month. It has seen an upward estimate revision for 2023 over the past seven days to $10.61 per share from $10.36. Its earnings topped consensus estimates in the trailing four quarters, with the average surprise being 24.4%. It carries an impressive VGM Score of A.