Lennar Corporation Earnings Preview: Will The Homebuilder Stock Show Resilience Amid Housing Challenges?

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Zinger Key Points
  • Expected Q3 earnings per share (EPS) of $3.52 reflects a 32% YoY drop, but sequential improvements suggest resilience.
  • The rise in mortgage rates creates scarcity in the secondary real estate market, driving demand for new homes.
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Lennar Corporation LEN, one of the leading homebuilders in the United States, is set to unveil its third-quarter results after the market closes this Thursday.

As investors eagerly await this update, here’s a closer look at what you need to know ahead of Lennar’s third-quarter earnings report.

Earnings Expected At $3.52 Per Share For The Quarter

Analysts’ consensus estimates project Lennar to report an earnings per share (EPS) of $3.52 for the third quarter. However, this figure reflects a noticeable decline of nearly 32% compared to the previous year’s $5.03 EPS. It’s important to note that despite this annual drop, Lennar has been steadily improving its EPS in the past two quarters, reporting $1.55 in the first quarter and $2.33 in the second.

If these expectations are met, it will mark the second consecutive quarter-on-quarter increase, demonstrating the company’s resilience. Lennar has outperformed earnings expectations in its last two reports.

Read also: Lennar Likely To Lower Q3 Earnings; Here’s A Look At Recent Price Target Changes By The Most Accurate Analysts

Lennar Has A Strong Track Record Of Revenue Beats

Sales for the third quarter are estimated to be around $8.49 billion, signifying a 5% decline compared to the same period last year. In the first and second quarters of this fiscal year, Lennar reported sales of $5.91 billion and $7.22 billion, respectively. Impressively, Lennar has consistently exceeded Wall Street’s revenue forecasts in its last six earnings reports, showcasing its strong sales performance.

Outlook,Guidance Key To Watch

The recent rise in mortgage rates has brought affordability challenges to the forefront of the housing market. Many homeowners who secured exceptionally low mortgage rates in the past are opting to stay put, effectively creating a scarcity of available homes in the secondary real estate market.

Prospective buyers are increasingly turning to newly constructed homes as their primary option.
Examining whether Lennar anticipates the persistence or potential escalation of this trend in the forthcoming quarters will be of significant importance.

Lennar Up 28% YTD, Slightly Underperforming Homebuilders

Year-to-date, Lennar’s stock has witnessed a 27.7% increase, demonstrating solid growth.

It’s worth noting that Lennar’s performance has slightly lagged behind the broader U.S. homebuilders industry, which has surged by 36% during the same period, as indicated by the iShares U.S. Home Construction ETF ITB. Interestingly, Lennar’s underperformance relative to its industry began around the end of July, as evident from the chart below.

Analyst Sentiment, Valuation

Wall Street analysts have set a 12-month average price target of $137.50 for Lennar, which is 17% higher than its stock price of $117. This suggests that analysts maintain a positive outlook on the company’s growth potential.

Lennar trades at a forward price-to-earnings ratio (P/E) of 8.7x, in line with its five-year average. Additionally, the forward price-to-sales ratio, calculated as the market capitalization divided by next year’s expected sales, stands at 1.00x, also in line with its five-year average.

Read now: Monthly Mortgage Payments Just Hit All-Time High — And Prices Jumped The Most In 10 Months

Photo via Shutterstock.

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