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Lennar (LEN) Q1 Earnings Beat, Revenues Miss, Orders Up
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Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
However, the company’s shares plunged 1.2% in the after-hours trading session on Mar 13. Investors’ sentiments might have been hurt by lower-than-expected revenues in the quarter as well as flat gross margin expectations and higher selling, general and administrative (SG&A) guidance for the second quarter of fiscal 2024.
Quarterly Numbers
LEN reported quarterly earnings per share (EPS) of $2.57, which surpassed the Zacks Consensus Estimate of $2.21 by 16.3%. The metric increased 25% year over year.
Revenues of $7.31 billion missed the consensus mark of $7.44 billion by 1.8% but rose 12.7% year over year from $6.49 billion.
Lennar Corporation Price, Consensus and EPS Surprise
Homebuilding: Revenues of the segment totaled $6.93 billion (below our expectation of $7.13 billion), up 12.6% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $6.9 billion to total revenues, up 13.3% from a year ago.
Land sales accounted for $20.8 million, up from $9.7 million in the prior-year quarter. The Other homebuilding unit contributed $8.5 million to homebuilding revenues, down from $52.8 million a year ago.
Home deliveries for the reported quarter improved 23% from the year-ago level to 16,798 units. The reported figure was below our projection of 16,912 units for the quarter. The average sales price (ASP) of homes delivered was $413,000, down 8% from the year-ago figure due to pricing to market through an increased use of incentives and product mix. Our model had predicted ASP to be $419.920 for the fiscal first quarter.
New orders rose 28% from the year-ago quarter to 18,176 homes. The potential value of net orders also increased 21% year over year to $7.7 billion.
Backlog at the fiscal first-quarter end declined 16.1% from a year ago to 16,270 homes. Potential housing revenues from backlog decreased 17.7% year over year to $7.4 billion.
The gross margin on home sales was 21.8% for the quarter, up 60 basis points (bps) year over year. Notably, the reported figure came above our projection of 21.1% for the quarter. The upside was due to reduced costs per square foot, reflecting the company's ongoing commitment to achieving construction cost efficiencies. However, this increase was somewhat mitigated by a decline in the average sales price and a rise in land costs.
SG&A expenses — as a percentage of home sales — rose 80 bps to 8.2% due to an increase in the use of brokers resulting from current market conditions and an uptick in digital marketing and advertising costs to generate more direct sales.
Financial Services: The segment’s revenues increased year over year to $249.7 million from $183 million for the reported quarter. Operating earnings for the quarter increased to $131.3 million from $78.7 million a year ago.
Lennar Multi-Family: Revenues of $129.7 million in the segment were down from $143.5 million in the prior-year quarter. The segment registered an operating loss of $15.6 million for the quarter, narrower than the year-ago loss of $21.6 million.
Lennar Other: The segment’s revenues totaled $2.5 million, down from $7.6 million a year ago. Its operating loss was $39.5 million for the quarter compared with $39.8 million in the comparable period of fiscal 2023.
Financials
At the fiscal first-quarter end, Lennar had homebuilding cash and cash equivalents of $5 billion, down from $6.27 billion at the end of fiscal 2023. LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $7.6 billion of liquidity.
The total homebuilding debt was $2.83 billion as of the fiscal first-quarter end, slightly up from $2.82 billion at the fiscal 2023-end. Homebuilding debt to capital at the fiscal first-quarter end was 9.6%, remaining the same as the fiscal 2023-end.
LEN repurchased 3.4 million shares for $506 million at an average share price of $148.95 in the fiscal first quarter.
Guidance
For second-quarter fiscal 2024, the company expects deliveries within 19,000-19,500 homes, depicting an increase from 17,074 homes delivered in the year-ago period. The company expects the ASP of the delivered units within $420,000-$425,000, down from an ASP of $449,000 reported a year ago.
The gross margin on home sales is expected to be 22.5%. SG&A expenses, as a percentage of home sales, are likely to be 7.2% for the quarter. In the prior year, gross margin was 22.5% and SG&A was 6.7%.
New orders are likely to be within 20,900-21,300 units, up from 17,885 homes reported a year ago.
Financial Services operating earnings are expected to be in the range of $110-$115 million in the fiscal second quarter.
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:
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Summit Materials, Inc. (SUM - Free Report) currently sports a Zacks Rank of 1. SUM delivered a trailing four-quarter earnings surprise of 18.2%, on average. The stock has gained 31.2% in the past six months.
The Zacks Consensus Estimate for SUM’s 2024 sales and EPS indicates growth of 80.2% and 53.2%, respectively, from a year ago.
Century Communities, Inc. (CCS - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 49.2%, on average. Shares of CCS have rallied 27.4% in the past six months.
The Zacks Consensus Estimate for CCS’ 2024 sales and EPS indicates a rise of 11.1% and 24.4%, respectively, from the prior-year levels.
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Lennar (LEN) Q1 Earnings Beat, Revenues Miss, Orders Up
Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
However, the company’s shares plunged 1.2% in the after-hours trading session on Mar 13. Investors’ sentiments might have been hurt by lower-than-expected revenues in the quarter as well as flat gross margin expectations and higher selling, general and administrative (SG&A) guidance for the second quarter of fiscal 2024.
Quarterly Numbers
LEN reported quarterly earnings per share (EPS) of $2.57, which surpassed the Zacks Consensus Estimate of $2.21 by 16.3%. The metric increased 25% year over year.
Revenues of $7.31 billion missed the consensus mark of $7.44 billion by 1.8% but rose 12.7% year over year from $6.49 billion.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Segment Details
Homebuilding: Revenues of the segment totaled $6.93 billion (below our expectation of $7.13 billion), up 12.6% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $6.9 billion to total revenues, up 13.3% from a year ago.
Land sales accounted for $20.8 million, up from $9.7 million in the prior-year quarter. The Other homebuilding unit contributed $8.5 million to homebuilding revenues, down from $52.8 million a year ago.
Home deliveries for the reported quarter improved 23% from the year-ago level to 16,798 units. The reported figure was below our projection of 16,912 units for the quarter. The average sales price (ASP) of homes delivered was $413,000, down 8% from the year-ago figure due to pricing to market through an increased use of incentives and product mix. Our model had predicted ASP to be $419.920 for the fiscal first quarter.
New orders rose 28% from the year-ago quarter to 18,176 homes. The potential value of net orders also increased 21% year over year to $7.7 billion.
Backlog at the fiscal first-quarter end declined 16.1% from a year ago to 16,270 homes. Potential housing revenues from backlog decreased 17.7% year over year to $7.4 billion.
The gross margin on home sales was 21.8% for the quarter, up 60 basis points (bps) year over year. Notably, the reported figure came above our projection of 21.1% for the quarter. The upside was due to reduced costs per square foot, reflecting the company's ongoing commitment to achieving construction cost efficiencies. However, this increase was somewhat mitigated by a decline in the average sales price and a rise in land costs.
SG&A expenses — as a percentage of home sales — rose 80 bps to 8.2% due to an increase in the use of brokers resulting from current market conditions and an uptick in digital marketing and advertising costs to generate more direct sales.
Financial Services: The segment’s revenues increased year over year to $249.7 million from $183 million for the reported quarter. Operating earnings for the quarter increased to $131.3 million from $78.7 million a year ago.
Lennar Multi-Family: Revenues of $129.7 million in the segment were down from $143.5 million in the prior-year quarter. The segment registered an operating loss of $15.6 million for the quarter, narrower than the year-ago loss of $21.6 million.
Lennar Other: The segment’s revenues totaled $2.5 million, down from $7.6 million a year ago. Its operating loss was $39.5 million for the quarter compared with $39.8 million in the comparable period of fiscal 2023.
Financials
At the fiscal first-quarter end, Lennar had homebuilding cash and cash equivalents of $5 billion, down from $6.27 billion at the end of fiscal 2023. LEN has no outstanding borrowings under the $2.6 billion revolving credit facility, thereby providing $7.6 billion of liquidity.
The total homebuilding debt was $2.83 billion as of the fiscal first-quarter end, slightly up from $2.82 billion at the fiscal 2023-end. Homebuilding debt to capital at the fiscal first-quarter end was 9.6%, remaining the same as the fiscal 2023-end.
LEN repurchased 3.4 million shares for $506 million at an average share price of $148.95 in the fiscal first quarter.
Guidance
For second-quarter fiscal 2024, the company expects deliveries within 19,000-19,500 homes, depicting an increase from 17,074 homes delivered in the year-ago period. The company expects the ASP of the delivered units within $420,000-$425,000, down from an ASP of $449,000 reported a year ago.
The gross margin on home sales is expected to be 22.5%. SG&A expenses, as a percentage of home sales, are likely to be 7.2% for the quarter. In the prior year, gross margin was 22.5% and SG&A was 6.7%.
New orders are likely to be within 20,900-21,300 units, up from 17,885 homes reported a year ago.
Financial Services operating earnings are expected to be in the range of $110-$115 million in the fiscal second quarter.
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:
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). The stock has gained 27.5% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Summit Materials, Inc. (SUM - Free Report) currently sports a Zacks Rank of 1. SUM delivered a trailing four-quarter earnings surprise of 18.2%, on average. The stock has gained 31.2% in the past six months.
The Zacks Consensus Estimate for SUM’s 2024 sales and EPS indicates growth of 80.2% and 53.2%, respectively, from a year ago.
Century Communities, Inc. (CCS - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 49.2%, on average. Shares of CCS have rallied 27.4% in the past six months.
The Zacks Consensus Estimate for CCS’ 2024 sales and EPS indicates a rise of 11.1% and 24.4%, respectively, from the prior-year levels.