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Lennar (LEN) Q4 Earnings, Revenues Top, Orders & Deliveries Up
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Lennar Corporation (LEN - Free Report) ended fiscal 2023 on an impressive note. This notable homebuilder reported better-than-expected earnings and revenues for fourth-quarter fiscal 2023. Also, its top and bottom lines increased on a year-over-year basis.
Higher interest rates, production deficit and chronic supply shortages continued to result in housing demand outweighing short supply. However, Lennar’s solid operating strategy of focusing on production and sales pace over price, generating strong cash flow, increasing returns on equity and assets and driving a robust bottom line bode well.
Stuart Miller, executive chairman and co-chief executive officer of LEN, stated, "We expect our strong land position and community count, along with our pace over price sales strategy, will allow us to aim for a year-over-year delivery growth rate of 10% in 2024.”
However, the company’s shares plunged 2.85% in the after-hours trading session on Dec 14. Investors’ sentiments might have been hurt by a bleak gross margin and higher Selling, general and administrative (“SG&A”) guidance for the first quarter of fiscal 2024.
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses on technology investments) of $5.17 per share, which surpassed the Zacks Consensus Estimate of $4.64 by 11.4%. The metric increased 3% year over year from $5.02 per share.
Lennar Corporation Price, Consensus and EPS Surprise
Revenues of $10.97 billion topped the Zacks Consensus Estimate of $10.34 billion by 6.1% and rose 7.8% year over year from $10.17 billion.
Segment Details
Homebuilding: Revenues of the segment totaled $10.5 billion, up 7.9% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $10.4 billion to total revenues, up 8.2% from a year ago.
Land sales accounted for $63.5 million, down from $79.2 million in the prior-year quarter. The Other homebuilding unit contributed $9.7 million to homebuilding revenues, up from $8.2 million a year ago.
Home deliveries for the reported quarter improved 18.6% from the year-ago level to 23,795 units. The average sales price (ASP) of homes delivered was $441,000, down 8.7% from the year-ago figure due to pricing to market through an increased use of incentives and product mix.
New orders rose 31.6% from the year-ago quarter to 17,366 homes. The potential value of net orders also increased 31.6% year over year to $7.28 billion.
Backlog at the fiscal 2023-end declined 21.1% from a year ago to 14,892 homes. Potential housing revenues from backlog decreased 24.1% year over year to $6.63 billion.
The gross margin on home sales was 24.2% for the quarter, down 60 basis points (bps). The downside was due to low home prices, partially offset by a decrease in costs per square foot as the company continued to focus on construction cost savings.
SG&A expenses — as a percentage of home sales — rose by 80 bps to 6.6% due to an increase in the use of brokers resulting from current market conditions.
Financial Services: The segment’s revenues increased year over year to $304.7 million from $230.7 million for the reported quarter. Operating earnings for the quarter increased to $169.1 million from $125.2 million a year ago.
Lennar Multi-Family: Revenues of $140.8 million in the segment were down from $179.2 million in the prior-year quarter. The segment registered an operating loss of $12.2 million for the quarter against earnings of $14.9 million a year ago.
Lennar Other: The segment’s revenues totaled $6.6 million, down from $22.8 million a year ago. Its operating loss was $125.4 million for the quarter compared with $105.1 million in the comparable period of fiscal 2022.
Fiscal 2023 Highlights
Adjusted earnings came in at $14.25 per share, down from $17.91 from the year-ago period. Revenues were $34.2 billion, up from $33.7 billion a year ago on higher deliveries.
The company delivered 73,087 homes during the year, reflecting an increase of 10.1% from fiscal 2022. New orders increased 13.1% year over year to 69,111 homes.
Financials
At fiscal 2023-end, Lennar had homebuilding cash and cash equivalents of $6.27 billion, up from $4.62 billion at the end of fiscal 2022. LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $8.9 billion of liquidity.
The total homebuilding debt was $2.82 billion as of fiscal 2023-end, down from $4.05 billion at the fiscal 2022-end. Homebuilding debt to capital at the fiscal 2023 end was 9.6%, down from 14.4% at the fiscal 2022-end. The debt to total capital ratio was the lowest in the company’s history, as it repaid $488 million of debt during the reported quarter.
LEN repurchased 3 million shares for $337 million at an average share price of $112.49 in the fiscal fourth quarter.
Guidance
For first-quarter fiscal 2024, the company expects deliveries within 16,500-17,000 homes with an ASP of nearly $420,000. In the year-ago period, deliveries were 13,659 homes at an ASP of $448,000.
The gross margin on home sales is expected to be 21-21.25%. SG&A expenses, as a percentage of home sales, are likely to be within 8-8.2% for the quarter. In the prior year, gross margin was 21.2% and SG&A was 7.4%.
New orders are likely to be within 17,500-18,000 units compared with 14,194 homes a year ago. It also anticipates 18,500 starts for the fiscal first quarter.
Financial Services operating earnings are expected in the range of $85-$90 million in the fiscal first quarter.
For fiscal 2024, LEN expects to deliver approximately 80,000 homes. Also, it targets to repurchase $2 billion worth of shares in 2024.
Zacks Rank & Other Stocks to Consider
Lennar currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Zacks Construction sector are Frontdoor, Inc. (FTDR - Free Report) , Knife River Corporation (KNF - Free Report) and James Hardie Industries plc (JHX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
Frontdoor: Based in Memphis, TN, the company provides home service plans in the United States. The company is benefiting from impressive customer retention rates. Thanks to the robust awareness of the Frontdoor brand, it has been shifting its attention toward capitalizing on customer demand. This strategic move allows FTDR to redirect its marketing investments toward expanding its Direct-to-Consumer channel under the American Home Shield brand. Looking ahead, the company is committed to establishing a solid foundation by investing in its brand, technology infrastructure and enhancing productivity throughout the organization.
Frontdoor has seen an upward estimate revision of 23% and 23.8% for 2023 and 2024 earnings over the past 60 days to $2.03 and $2.34 per share, respectively. The estimated figure indicates 59.8% and 15.1% year-over-year growth for 2023 and 2024, respectively. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 163.7%.
Knife River: Headquartered in Bismarck, ND, this firm offers construction materials and contracting services throughout the United States, specializing in aggregates-based solutions. Knife River has effectively implemented its EDGE plan to enhance Adjusted EBITDA margins and achieve strategic objectives. A crucial component of this strategy involves optimizing pricing to fully capture the value of core products, including aggregates, ready-mix concrete, asphalt and contracting services. The company has adopted a more judicious approach in selecting higher-margin projects within its contracting services division. Despite challenges, Knife River maintains a positive outlook on the long-term market strength, anticipating favorable impacts from local, state and federal funding.
Knife River has seen an upward estimate revision of 30.2% for 2023 earnings over the past 60 days to $3.15 per share. The company’s earnings surpassed the Zacks Consensus Estimate in the last reported quarter by 41%.
James Hardie Industries: The company pioneered the development of fiber cement technology in the 1980s. JHX has many product applications, including external siding, trim and fascia, ceiling lining and flooring, partitioning, decorative columns, fencing and drainage pipes.
JHX has seen an upward estimate revision of 0.6% and 1.2% for fiscal 2024 and 2025 earnings over the past seven days to $1.58 per share and $1.66 per share, respectively. The estimated figure indicates 16.2% and 5.1% year-over-year growth for fiscal 2024 and 2025, respectively.
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Lennar (LEN) Q4 Earnings, Revenues Top, Orders & Deliveries Up
Lennar Corporation (LEN - Free Report) ended fiscal 2023 on an impressive note. This notable homebuilder reported better-than-expected earnings and revenues for fourth-quarter fiscal 2023. Also, its top and bottom lines increased on a year-over-year basis.
Higher interest rates, production deficit and chronic supply shortages continued to result in housing demand outweighing short supply. However, Lennar’s solid operating strategy of focusing on production and sales pace over price, generating strong cash flow, increasing returns on equity and assets and driving a robust bottom line bode well.
Stuart Miller, executive chairman and co-chief executive officer of LEN, stated, "We expect our strong land position and community count, along with our pace over price sales strategy, will allow us to aim for a year-over-year delivery growth rate of 10% in 2024.”
However, the company’s shares plunged 2.85% in the after-hours trading session on Dec 14. Investors’ sentiments might have been hurt by a bleak gross margin and higher Selling, general and administrative (“SG&A”) guidance for the first quarter of fiscal 2024.
Quarterly Numbers
LEN reported adjusted quarterly earnings (excluding mark-to-market losses on technology investments) of $5.17 per share, which surpassed the Zacks Consensus Estimate of $4.64 by 11.4%. The metric increased 3% year over year from $5.02 per share.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Revenues of $10.97 billion topped the Zacks Consensus Estimate of $10.34 billion by 6.1% and rose 7.8% year over year from $10.17 billion.
Segment Details
Homebuilding: Revenues of the segment totaled $10.5 billion, up 7.9% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $10.4 billion to total revenues, up 8.2% from a year ago.
Land sales accounted for $63.5 million, down from $79.2 million in the prior-year quarter. The Other homebuilding unit contributed $9.7 million to homebuilding revenues, up from $8.2 million a year ago.
Home deliveries for the reported quarter improved 18.6% from the year-ago level to 23,795 units. The average sales price (ASP) of homes delivered was $441,000, down 8.7% from the year-ago figure due to pricing to market through an increased use of incentives and product mix.
New orders rose 31.6% from the year-ago quarter to 17,366 homes. The potential value of net orders also increased 31.6% year over year to $7.28 billion.
Backlog at the fiscal 2023-end declined 21.1% from a year ago to 14,892 homes. Potential housing revenues from backlog decreased 24.1% year over year to $6.63 billion.
The gross margin on home sales was 24.2% for the quarter, down 60 basis points (bps). The downside was due to low home prices, partially offset by a decrease in costs per square foot as the company continued to focus on construction cost savings.
SG&A expenses — as a percentage of home sales — rose by 80 bps to 6.6% due to an increase in the use of brokers resulting from current market conditions.
Financial Services: The segment’s revenues increased year over year to $304.7 million from $230.7 million for the reported quarter. Operating earnings for the quarter increased to $169.1 million from $125.2 million a year ago.
Lennar Multi-Family: Revenues of $140.8 million in the segment were down from $179.2 million in the prior-year quarter. The segment registered an operating loss of $12.2 million for the quarter against earnings of $14.9 million a year ago.
Lennar Other: The segment’s revenues totaled $6.6 million, down from $22.8 million a year ago. Its operating loss was $125.4 million for the quarter compared with $105.1 million in the comparable period of fiscal 2022.
Fiscal 2023 Highlights
Adjusted earnings came in at $14.25 per share, down from $17.91 from the year-ago period. Revenues were $34.2 billion, up from $33.7 billion a year ago on higher deliveries.
The company delivered 73,087 homes during the year, reflecting an increase of 10.1% from fiscal 2022. New orders increased 13.1% year over year to 69,111 homes.
Financials
At fiscal 2023-end, Lennar had homebuilding cash and cash equivalents of $6.27 billion, up from $4.62 billion at the end of fiscal 2022. LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $8.9 billion of liquidity.
The total homebuilding debt was $2.82 billion as of fiscal 2023-end, down from $4.05 billion at the fiscal 2022-end. Homebuilding debt to capital at the fiscal 2023 end was 9.6%, down from 14.4% at the fiscal 2022-end. The debt to total capital ratio was the lowest in the company’s history, as it repaid $488 million of debt during the reported quarter.
LEN repurchased 3 million shares for $337 million at an average share price of $112.49 in the fiscal fourth quarter.
Guidance
For first-quarter fiscal 2024, the company expects deliveries within 16,500-17,000 homes with an ASP of nearly $420,000. In the year-ago period, deliveries were 13,659 homes at an ASP of $448,000.
The gross margin on home sales is expected to be 21-21.25%. SG&A expenses, as a percentage of home sales, are likely to be within 8-8.2% for the quarter. In the prior year, gross margin was 21.2% and SG&A was 7.4%.
New orders are likely to be within 17,500-18,000 units compared with 14,194 homes a year ago. It also anticipates 18,500 starts for the fiscal first quarter.
Financial Services operating earnings are expected in the range of $85-$90 million in the fiscal first quarter.
For fiscal 2024, LEN expects to deliver approximately 80,000 homes. Also, it targets to repurchase $2 billion worth of shares in 2024.
Zacks Rank & Other Stocks to Consider
Lennar currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Zacks Construction sector are Frontdoor, Inc. (FTDR - Free Report) , Knife River Corporation (KNF - Free Report) and James Hardie Industries plc (JHX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Frontdoor: Based in Memphis, TN, the company provides home service plans in the United States. The company is benefiting from impressive customer retention rates. Thanks to the robust awareness of the Frontdoor brand, it has been shifting its attention toward capitalizing on customer demand. This strategic move allows FTDR to redirect its marketing investments toward expanding its Direct-to-Consumer channel under the American Home Shield brand. Looking ahead, the company is committed to establishing a solid foundation by investing in its brand, technology infrastructure and enhancing productivity throughout the organization.
Frontdoor has seen an upward estimate revision of 23% and 23.8% for 2023 and 2024 earnings over the past 60 days to $2.03 and $2.34 per share, respectively. The estimated figure indicates 59.8% and 15.1% year-over-year growth for 2023 and 2024, respectively. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 163.7%.
Knife River: Headquartered in Bismarck, ND, this firm offers construction materials and contracting services throughout the United States, specializing in aggregates-based solutions. Knife River has effectively implemented its EDGE plan to enhance Adjusted EBITDA margins and achieve strategic objectives. A crucial component of this strategy involves optimizing pricing to fully capture the value of core products, including aggregates, ready-mix concrete, asphalt and contracting services. The company has adopted a more judicious approach in selecting higher-margin projects within its contracting services division. Despite challenges, Knife River maintains a positive outlook on the long-term market strength, anticipating favorable impacts from local, state and federal funding.
Knife River has seen an upward estimate revision of 30.2% for 2023 earnings over the past 60 days to $3.15 per share. The company’s earnings surpassed the Zacks Consensus Estimate in the last reported quarter by 41%.
James Hardie Industries: The company pioneered the development of fiber cement technology in the 1980s. JHX has many product applications, including external siding, trim and fascia, ceiling lining and flooring, partitioning, decorative columns, fencing and drainage pipes.
JHX has seen an upward estimate revision of 0.6% and 1.2% for fiscal 2024 and 2025 earnings over the past seven days to $1.58 per share and $1.66 per share, respectively. The estimated figure indicates 16.2% and 5.1% year-over-year growth for fiscal 2024 and 2025, respectively.