Earnings Preview: Lennar Looks to Build on a Foundation of Positive Surprises

The homebuilder Lennar Corp. (NYSE: LEN) has seen its share price rise by more than 45% over the past 12 months. The stock has added 28% over the past six months and posted its 52-week high late last month. After missing EPS estimates in the March quarter of 2019, Lennar has beaten the consensus estimate in 16 consecutive quarters. Sales have topped estimates in 13 of those 16 quarters.

For the quarter just ended, however, revenues beat estimates, even for the traditionally weak time of year for home sales, partially a result of higher mortgage rates. Turmoil in the banking sector caused by the insolvency closures of Silicon Valley Bank and Signature Bank of New York has not helped the homebuilding industry either.

Lennar is the second-largest public homebuilder by closings in the United States, delivering over 60,000 homes in 2022. The firm has diversified its core homebuilding operations with the addition of real estate investment and management, multifamily and single-family, and commercial real estate development in California. The company also owns a financial services business.

Of 22 analysts covering the stock, 13 have a Buy or Strong Buy rating and nine more rate it at Hold. At a recent price of around $114 a share, the upside potential to the consensus price target of $115.41 is 1.2%. At a high target of $153.00, the upside potential is 34.2%.

For its second quarter of fiscal 2023, Lennar is expected to report revenue of $7.17 billion, which would be up 10.5% sequentially and down by 14.2% year over year. Adjusted EPS are pegged at $2.31, up 49.0% sequentially but 48.6% lower year over year. For the full fiscal year ending in November, EPS are forecast at $10.01, down 36.3%, on sales of $29.44 billion, down 12.6%.

Lennar stock trades at 11.4 times expected 2023 EPS and 10.5 times estimated 2024 earnings of $10.81. The stock’s 52-week trading range is $62.54 to $117.04. Lennar pays an annual dividend of $1.50 (yield of 1.31%).

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