Market Overview

Lennar Earnings Preview: Another Strong Quarter Expected

Lennar (NYSE: LEN), the nation's third largest homebuilder, is scheduled to report its fourth-quarter and fiscal-year results Tuesday, January 15, before the markets open. Investors will be looking for the momentum in 2012 as the housing market recovery picked up steam to continue, as indicated by an increase in orders and the size of the company's order backlog.

Expectations

Analysts on average predict that Lennar will report that revenue grew more than 38 percent year-over-year to $1.32 billion. And quarterly earnings of $0.44 per share are also expected. That compares to a profit of $0.16 per share in the same period of last year. Individual earnings per share (EPS) estimates fall in a range from $0.21 to $0.57. Note that Lennar easily exceeded the consensus EPS estimate in the past three quarters.

Back in the third quarter, Lennar beat expectations on both the top and bottom lines. The company attributed strong growth to such drivers as low mortgage rates, affordable home prices and increased buyer confidence. But the share price pulled back about six percent in the week following the earnings release, before resuming its upward trend.

For the fiscal year that ended November 30, analysts expect to see earnings of $3.00 per share, up from $0.48 per share in the previous year. That consensus estimate has risen in the past 60 days from a $2.97 per share. The consensus forecast also has revenue that is more than 31 percent higher year-over-year to $4.07 billion.

The Company

Lennar engages in homebuilding, financial services and real estate businesses in the United States. The Fortune 500 company has a market capitalization near $7.8 billion, was founded in 1954 and is headquartered in Miami. Stuart A. Miller has been chief executive since April 1997.

Competitors include D.R. Horton (NYSE: DHI), KB Home (NYSE: KBH) and Pulte Group (NYSE: PHM). All three are expected to post strong revenue growth for their most recent quarters. But analysts see a net loss from KB Home.

During the three months that ended in November, Lennar announced a $350 million senior note offering, and its share price reached a series of new multiyear highs.

Performance

The long-term EPS growth forecast is more than 10 percent, and the price-to-earnings (P/E) ratio is lower than the industry average. The company's return on equity is more than 19 percent. But the short interest is more than 21 percent of the float. Of the 26 analysts surveyed by Thomson/First Call who follow the stock, just 10 recommend buying shares. The current share price has overrun their mean price target, but the most optimistic price target represents almost 11 percent potential upside.

The stock is up about 86 percent from a year ago, including almost 10 percent in the past month. The share price is above the 50-day and 200-day moving averages. However, over the past six months, the stock has underperformed KB Home and Pulte Group even though it has outperformed the broader markets.

Posted-In: D.R. HortonEarnings Long Ideas News Short Ideas Previews Management Trading Ideas Best of Benzinga

 

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