Will Lennar Corporation (LEN) Miss Earnings Estimates? - Analyst Blog

Lennar Corporation LEN is set to report its first-quarter fiscal 2014 results on March 20 before the market opens. Last quarter, it posted a positive surprise. Let's see how things are shaping up for this announcement.

Factors to Consider

The recent spike in interest/mortgage rates and political turmoil has paused the rate of recovery of the housing market. However, management believes that the slowdown in sales pace is only temporary and the housing recovery is still very much intact.

In-fact, management witnessed sequential improvement in order trends every month throughout the fourth quarter with November being the strongest month in the quarter. As a result, the company expects a strong spring selling season for fiscal 2014.

However, gross margins are expected to be softer in the first quarter. In fact, management expects that gross margins will be lower is the first half but highest in the fourth quarter.  

Earnings Whisper?

Our proven model does not conclusively show that Lennar Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP:  The Earnings ESP is 0.00%.  

Zacks Rank: Lennar Corporation carries a Zacks Rank #2 (Buy) which when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other homebuilding companies with a positive earnings ESP and a Zacks Rank #1, 2 or 3, which you may consider:    

DR Horton Inc. DHI, with Earnings ESP of +3.03% and a Zack sRank #2 (Buy).

NVR, Inc. NVR, with Earnings ESP of +0.38% and a Zacks Rank #2 (Buy).

MDC Holdings Inc. MDC, with Earnings ESP of +8.70% and a Zacks Rank #3 (Hold).