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Lennar (LEN) Drops Ahead of Earnings: Will Home Sales Lift Stock?

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Shares of Lennar Corporation (LEN - Free Report) fell about 0.85% during regular trading hours Thursday, adding to a cold streak which has seen the stock shed nearly 10% over the past month. This suggest investors are showing some skepticism ahead of the homebuilder’s earnings report announcement, which is due before the market opens tomorrow.

Lennar became the largest homebuilder in the United States when it acquired CalAtlantic Homes last year. The company builds homes in 21 states, reaching 49 individual markets around the country.

Confidence among homebuilders has been relatively strong recently, with the September read on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) remaining unchanged from the previous month.

The September 2018 HMI was up three points to 67 from the year-ago period. Current sales conditions added one point, while sales prediction for the next six months rose two points. Buyer traffic remained steady. Notably, the HMI gauge for future sales expectations remained in the 70s, suggesting the industry’s outlook for next year is still solid.

Meanwhile, August housing starts data was also encouraging. Privately-owned housing starts in the month came in at a seasonally-adjusted rate of 1.282 million, up 9.2% from July and 9.4% from August 2017.

But will this industry strength produce strong results for Lennar? Let’s take a closer look.

Lennar Corporation Price, Consensus and EPS Surprise

Lennar Corporation Price, Consensus and EPS Surprise | Lennar Corporation Quote

Earnings Outlook

Lennar will release its Q3 fiscal 2018 results before the market opens on Tuesday. Investors should note that year-over-year comparisons may be skewed due to the acquisition. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:

Earnings: Lennar is expected to see adjusted earnings of $1.20 per share. These results would represent year-over-year growth of 13.2%.

Estimate Revisions: Lennar has seen no negative revisions to its soon-to-be-reported quarter’s EPS estimates within the past 60 days. However, the stock’s Most Accurate Estimate—the representation of the most recent analyst sentiment—sits 0.6% higher than the consensus. This implies that the latest sentiment has been optimistic.

Revenue: Consensus estimates have Lennar’s Q3 revenue pegged at $5.67 billion. This would mark growth of about 73.9% from the prior-year quarter.

Bottom Line

The homebuilders themselves have displayed confidence recently, and the latest monthly housing starts data was robust. However, concerns about a slowdown in domestic economic growth, apathy from investors, and inactivity from analysts remain question marks ahead of the report.

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