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Here's What to Expect From Lennar (LEN) in Q2 Earnings

Lennar Corporation LEN is slated to report second-quarter fiscal 2024 results (ended May 31) after the closing bell on Jun 17.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 16.3% but total revenues missed the same by 1.8%. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in the trailing 20 quarters.

On a year-over-year basis, fiscal first-quarter earnings and revenues increased 25% and 12.7%, respectively.

The Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has remained unchanged at $3.20 in the past 30 days. The estimated figure indicates an increase of 8.8% from $2.94 reported in the year-ago quarter.

The consensus mark for revenues is pegged at $8.57 billion, suggesting 6.6% growth from the year-ago reported figure of $8.05 billion.

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

Lennar Corporation Price and EPS Surprise

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

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

Factors to Note

Lennar’s fiscal second-quarter home sales are expected to have increased from the year-ago level, given higher deliveries. The company has been riding on its solid operating strategy of focusing on production and sales pace over price, land light strategy and favorable pricing and product mix.

Our model predicts home sales to increase 6.4% year over year to $8.1 billion in the quarter. Homebuilding revenues are expected to be $8.2 billion, up 6.4% year over year.

On the fiscal first-quarter earnings call, LEN highlighted that it expects home deliveries of 19,000-19,500 units with ASP between $420,000 and $425,000 (indicating a decline from $449,000 a year ago). Meanwhile, our estimate for deliveries for the to-be-reported quarter is currently pegged at 19,200 homes, indicating a rise of 12.4% from 17,074 units a year ago. We expect the ASP of the delivered units to be at $423,190.

Lennar expects new orders in the range of 20,900-21,300, pointing to growth from 17,885 reported in second-quarter fiscal 2023. Our estimate for new orders is currently pegged at 21,150 homes, reflecting 18.3% growth from a year ago. Low-existing homes for sale have been driving future demand for new homes in the market. Also, digital marketing platforms and a dynamic pricing model bode well.

Our model predicts a backlog (units and values) of 18,220 homes or $8.32 billion compared with the year-ago quarter’s figures of 20,214 units or $9.53 billion.

That said, higher land, labor and raw material costs are expected to have put pressure on fiscal second-quarter margins. The company expects the homebuilding gross margin to be 22.5%, pointing to a flat growth from a year ago.

Meanwhile, Lennar expects homebuilding selling, general and administrative (SG&A) expenses, as a percentage of home sales, to be 7.2%. In the year-ago quarter, the metric was recorded at 6.7%. Our model predicts homebuilding SG&A to be 7.3% in the quarter compared with the year-ago quarter’s figure of 6.7%. The increase will likely be due to a greater reliance on brokers driven by current market conditions, along with higher digital marketing and advertising costs aimed at boosting direct sales.

Meanwhile, Financial Services operating earnings are expected to be in the range of $110-$115 million in the fiscal second quarter. Our model predicts Financial Services operating earnings to be $113.3 million in the quarter compared with the year-ago quarter’s figures of $112.6 million.

What the Zacks Model Unveils

Our proven model does not 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.

Stocks With the Favorable Combination

Here are some companies in the Construction space that, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported.

KB Home KBH has an Earnings ESP of +0.38% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KBH is expected to register an 8.3% decline in earnings on 7.2% lower revenues for the to-be-reported quarter. KBH reported better-than-expected earnings in all the last four quarters, the average surprise being 26.1%.

Quanta Services, Inc. PWR has an Earnings ESP of +2.67% and presently carries a Zacks Rank #3.

PWR is expected to register a 13.3% increase in earnings on 9.4% higher revenues for the to-be-reported quarter. The company reported better-than-expected earnings in three of the last four quarters and missed on the other one occasion, the average surprise being 4.7%.

United Rentals, Inc. URI has an Earnings ESP of +0.28% and presently carries a Zacks Rank #3.

URI’s earnings for the to-be-reported quarter are expected to be up 6.3% on 6.1% higher revenues from the year-ago level. The company reported better-than-expected earnings in all the last four quarters, the average surprise being 6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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