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Lennar (LEN) to Report Q2 Earnings: What's in the Cards?
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Miami-based homebuilder Lennar Corporation (LEN - Free Report) is set to report second-quarter fiscal 2017 results on Jun 20, before market open. Last quarter, the company delivered a positive earnings surprise of 5.36%. In fact, the company delivered a positive earnings surprise in each of the trailing four quarters, with an average surprise of 8.71%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
It is important to note that Lennar’s earnings per share decreased 6.3% year over year during the fiscal first quarter. The downside was mainly due to a higher tax rate, certain one-time WCI closing costs and a decline in gross margin.
Although the company expects the said factors to create some pressure on the to-be-reported quarter’s earnings, robust sales pace along with limited supply will likely increase pricing power thereby aiding to its bottom line.
Lennar is one of the best positioned homebuilders to capitalize on the housing recovery, courtesy of its diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage. The company had already raised its delivery goal during first-quarter earnings call in the range of 29,500–30,000 homes for 2017. It also expects the backlog conversion ratio to be approximately 75% to 80% for the second quarter.
A series of reports released in recent times indicate robust housing demand. Such a trend is likely to continue this year, with mortgage rates still at appreciably low levels and demand outstripping supply.
Again, the company’s acquisition of WCI Communities in February is expected to contribute to its top line. However, there will be an impact on the company’s second-quarter gross margin from writing up WCI's backlog in purchase accounting. As a result, second-quarter gross margin is expected to be in the range of 21– 21.5% (against 23.1% in the year-ago quarter).
For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at 78 cents, reflecting a decrease of 18.2% year over year. Meanwhile, our estimate for revenues is pegged at $2.89 billion, implying a 5.4% increase.
Earnings Whispers
Our proven model does not conclusively show that Lennar is likely to beat on earnings this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00% as the Most Accurate estimate of 78 cents per share is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Lennar has a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You may consider the following stocks from the construction space that have both a positive Earnings ESP and a favorable Zacks Rank for their upcoming releases.
The Sherwin-Williams Company (SHW - Free Report) has an Earnings ESP of +0.22% and a Zacks Rank #1. The company is expected to report its quarterly results on Jul 20, 2017.
Patrick Industries, Inc. (PATK - Free Report) has an Earnings ESP of +1.71% and a Zacks Rank #2. The company is expected to report its quarterly results on Jul 27, 2017.
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Lennar (LEN) to Report Q2 Earnings: What's in the Cards?
Miami-based homebuilder Lennar Corporation (LEN - Free Report) is set to report second-quarter fiscal 2017 results on Jun 20, before market open. Last quarter, the company delivered a positive earnings surprise of 5.36%. In fact, the company delivered a positive earnings surprise in each of the trailing four quarters, with an average surprise of 8.71%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
It is important to note that Lennar’s earnings per share decreased 6.3% year over year during the fiscal first quarter. The downside was mainly due to a higher tax rate, certain one-time WCI closing costs and a decline in gross margin.
Although the company expects the said factors to create some pressure on the to-be-reported quarter’s earnings, robust sales pace along with limited supply will likely increase pricing power thereby aiding to its bottom line.
Lennar is one of the best positioned homebuilders to capitalize on the housing recovery, courtesy of its diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage. The company had already raised its delivery goal during first-quarter earnings call in the range of 29,500–30,000 homes for 2017. It also expects the backlog conversion ratio to be approximately 75% to 80% for the second quarter.
A series of reports released in recent times indicate robust housing demand. Such a trend is likely to continue this year, with mortgage rates still at appreciably low levels and demand outstripping supply.
Again, the company’s acquisition of WCI Communities in February is expected to contribute to its top line. However, there will be an impact on the company’s second-quarter gross margin from writing up WCI's backlog in purchase accounting. As a result, second-quarter gross margin is expected to be in the range of 21– 21.5% (against 23.1% in the year-ago quarter).
For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at 78 cents, reflecting a decrease of 18.2% year over year. Meanwhile, our estimate for revenues is pegged at $2.89 billion, implying a 5.4% increase.
Earnings Whispers
Our proven model does not conclusively show that Lennar is likely to beat on earnings this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00% as the Most Accurate estimate of 78 cents per share is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Lennar has a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Lennar Corporation Price and EPS Surprise
Lennar Corporation Price and EPS Surprise | Lennar Corporation Quote
Stocks to Consider
You may consider the following stocks from the construction space that have both a positive Earnings ESP and a favorable Zacks Rank for their upcoming releases.
The Sherwin-Williams Company (SHW - Free Report) has an Earnings ESP of +0.22% and a Zacks Rank #1. The company is expected to report its quarterly results on Jul 20, 2017.
CalAtlantic Group, Inc. has an Earnings ESP of +3.85%. This Zacks Rank #3 company is expected to report its quarterly results on Jul 27, 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.
Patrick Industries, Inc. (PATK - Free Report) has an Earnings ESP of +1.71% and a Zacks Rank #2. The company is expected to report its quarterly results on Jul 27, 2017.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>