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Argus Sees 27% Upside For Lennar Corporation; Starts With Buy, $59 PT

Argus Sees 27% Upside For Lennar Corporation; Starts With Buy, $59 PT
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Argus has started coverage of Lennar Corporation (NYSE: LEN), the second-largest homebuilder in the United States based on unit sales, with a Buy rating and price target of $59, implying a potential upside of 27 percent from Friday's close.

"Although sales of new homes are on track to grow for the fifth straight year in 2016, we believe that the market is still in the middle stages of its upcycle given the severity of the preceding downturn," analyst Stephen Biggar wrote in a note.

Biggar expects the mortgage rates not to peak until new home sales reach at least 700,000 units, well above the 502,000 new homes sold in 2015.

"We think that LEN's strong geographic presence, and its focused and creative marketing effort, will allow it to post some of the best results in its industry," the analyst highlighted.

Related Link: Lennar Relinquishes Gains After Q2 Beat

Biggar set a FY16 EPS forecast of $4.00, up 15.6 percent from $3.46 in FY15, and sees further 13.8 percent rise in FY17 EPS to $4.55.

The analyst noted that over the past five years, as the U.S. housing market has recovered from recession, Lennar has delivered compound annual revenue growth of 25.2 percent, net income growth of 35.1 percent and EPS growth of 40.6 percent. Biggar set a 13 percent five-year EPS growth outlook for Lennar.

On the valuation front, the analyst said that LEN shares are undervalued at 10.2-times his FY17 EPS estimate, "a multiple more typical of the cycle peak, when earnings are at their highest."

Shares of Lennar closed Friday's regular trading session at $46.42.

Latest Ratings for LEN

Feb 2018JP MorganUpgradesNeutralOverweight
Feb 2018BarclaysUpgradesEqual-WeightOverweight
Jan 2018Credit SuisseUpgradesNeutralOutperform

View More Analyst Ratings for LEN
View the Latest Analyst Ratings

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