Lennar (LEN) to Post Q3 Earnings: Higher Pricing Holds Key


Lennar Corporation (LEN Quick QuoteLEN ) is slated to report results for third-quarter fiscal 2021 (ended Aug 31) after the closing bell on Sep 20.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 26.1% and 4.3%, respectively. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in 13 of the trailing 14 quarters.

On a year-over-year basis, fiscal second-quarter earnings and revenues grew 96.7% and 21.6%, respectively.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $3.24 over the past 60 days. The estimated figure indicates an increase of 52.8% from $2.12 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $7.27 billion, suggesting a 23.8% increase from the year-ago reported figure of $5.87 billion.

Let’s see how things have shaped up for this announcement.

Lennar Corporation Price and EPS Surprise Lennar Corporation Price and EPS Surprise

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

Factors to Note

Higher deliveries and pricing are expected to have benefited Lennar’s fiscal third-quarter Homebuilding revenues (accounting for more than 93% of total revenues). Lower borrowing costs, an improved economy, more governmental stimulus and vaccination drive are expected to boost the results.

The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $6.82 billion, which indicates an increase of 24% from the year-ago period.

For the fiscal third quarter, Lennar expects deliveries in the range of 15,800-16,100 homes, indicating an improvement from the year-ago reported figure of 13,809. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 16,018 homes, indicating an increase of 15.7% from a year ago. The company expects average sales price between $420,000 and $425,000, suggesting an increase from $396,000 a year ago. Lennar also expects new orders in the 16,000-16,300 range, indicating an increase from 15,564 reported in third-quarter fiscal 2020.

From the margin perspective, higher average sales and strong demand are likely to have expanded margins. The company expects homebuilding gross margin in the range of 27-27.5%, pointing to an increase from 23.1% a year ago, mainly on a robust pricing environment.

Lennar has been focusing on controlling construction costs and managing sales price prudently, which may have benefited gross margin in the fiscal third quarter.

Again, it has been focused on continuous improvement of the homebuilding selling, general and administrative (SG&A) line owing to operating leverage along with investments in technology. The company expects SG&A expenses, as a percentage of home sales, within 7.3-7.4%. A year ago, the metric was recorded at 8%.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Lennar this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Lennar carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

KB Home (KBH Quick QuoteKBH ) has an Earnings ESP of +1.12% and holds a Zacks Rank #2.

Quanta Services, Inc. (PWR Quick QuotePWR ) has an Earnings ESP of +3.55% and a Zacks Rank #2.

ChampionX Corporation (CHX Quick QuoteCHX ) has an Earnings ESP of +6.74% and a Zacks Rank #3.

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