Back to top

Image: Bigstock

Lennar (LEN) to Report Q1 Earnings: What's in the Cards?

Read MoreHide Full Article

Lennar Corporation (LEN - Free Report) is slated to report results for first-quarter fiscal 2020 (ended Feb 29), before the opening bell on Mar 19.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 12.1% and 4.9%, respectively. Notably, this Miami-based homebuilder surpassed earnings expectations in six of the trailing seven quarters.

On a year-over-year basis, earnings and revenues grew 15.8% and 7.9%, respectively, buoyed by higher deliveries and continued operating leverage on technological efforts.

Estimate Revision Scenario

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at 83 cents over the past 30 days. The estimated figure indicates an increase of 12.2% from 74 cents per share reported in the year-ago quarter. Nonetheless, the consensus mark for revenues is pegged at $4.38 billion, suggesting a 13.2% increase from the year-ago reported figure of $3.87 billion.

Let’s see how things have shaped up for this announcement.

Lennar Corporation Price and EPS Surprise


Lennar Corporation Price and EPS Surprise

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

Factors to Note

Lennar’s fiscal first-quarter revenues are expected to have increased from the year-ago level, given lower mortgage rates and continued demand for affordable housing from multiple demographic groups. The company has been shifting the business mix to lower-priced homes. This is expected to have boosted its sales absorption pace. Overall, higher volume and robust backlog position are expected to have aided the company’s Homebuilding revenues (accounting for 93.4% of total revenues). The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $3.91 billion, which indicates an increase of 7.8% from $3.62 billion in the year-ago period but a 40.2% decline from $6.54 billion in the last reported quarter.

Lennar expects deliveries for the to-be-reported quarter within 9,800-10,000 homes, indicating an increase from 8,820 units reported a year ago but a decrease from 16,420 units in the last reported quarter. Average sales price is expected between $390,000 and $395,000, indicating a drop from $410,000 in the year-ago period. In the last reported quarter, it was $393,000. The consensus estimate for deliveries is currently pegged at 9,903 units, suggesting a 12.3% year-over-year jump but a 39.7% sequential decline.

The company, which shares its space with PulteGroup (PHM - Free Report) KB Home (KBH - Free Report) and Toll Brothers (TOL - Free Report) in the Zacks Building Products - Home Builders industry, expects new orders in the 11,300-11,500 range, suggesting an increase from 10,463 in first-quarter fiscal 2019 but a decline from 13,089 units in the last reported quarter. The consensus estimate for backlog is currently pegged at 17,042 units, suggesting a 1.3% year-over-year drop but a 9.4% sequential increase.

From the margins perspective, lower average sales prices have been threatening Lennar’s margins. The company’s focus on targeting more first-time homebuyers and lower-priced homes has been impacting margins. This is likely to have hampered its performance in the quarter to be reported.

Nonetheless, Lennar has been focused on continued improvement in the SG&A (selling, general and administrative) line owing to operating leverage and investments in technology. SG&A expenses — as a percentage of home sales — are estimated within 9.4-9.5%, indicating almost at par with the year-ago figure of 9.5% but an increase from 7.6% in the fiscal fourth quarter.

What the Zacks Model Unveils

Lennar does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — to increase the odds of an earnings beat.

Earnings ESP: Lennar has an Earnings ESP of -3.42%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Lennar carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

PulteGroup, Inc. (PHM) - free report >>

Toll Brothers Inc. (TOL) - free report >>

KB Home (KBH) - free report >>

Lennar Corporation (LEN) - free report >>