Resilient demand, born from a post-pandemic home shortage, has underpinned the vigorous growth of numerous homebuilders in recent years. Among them, Lennar Corporation has stood out.
While Lennar managed to surpass its fiscal second-quarter revenue and profit projections after-hours on Monday, the stock experienced a -5% decline in today’s trading session. This dip may have been triggered by profit-taking in the wake of weaker-than-expected EPS guidance. As the stock now sits -13% below its 52-week peak of $172 in March, investors are pondering whether this post-earnings downturn presents a buying opportunity.
Quarterly Performance Review
Lennar delivered approximately 19,700 homes in the second quarter and sold a total of 21,300 homes. This led to Q2 sales of $8.76 billion, outstripping estimates by 2% and showing an 8% increase from $8.04 billion in the previous year’s comparable quarter. On the bottom line, Q2 EPS of $3.38 surpassed projections by 5% and surged by 15% from $2.94 per share a year earlier.
Guidance
Lennar foresees Q3 deliveries ranging from 20,500 to 21,000 homes and anticipates that total home deliveries will climb by 10% this year to around 80,000, with a margin slightly over 23%. Furthermore, the company plans to buy back $2 billion of its stock in 2024 based on robust cash flow. However, Lennar predicts Q3 EPS to fall within the range of $3.50-$3.65, below the current Zacks Consensus of $3.78 per share. Zacks estimates suggest Lennar’s annual earnings will rise by 1% in fiscal 2024 and are projected to spike by an additional 12% in FY25 to $16.25 per share.
Recent Stock Performance
Following today’s selloff, Lennar’s stock has displayed nearly flat year-to-date performance but still boasts a +24% increase over the past year, matching the S&P 500 yet trailing behind the Zacks Building Products-Home Builders Market, with notables such as Toll Brothers at +60% and PulteGroup at +51% outperforming.
Valuation Comparison
In terms of P/E valuation, Lennar’s forward earnings multiple of 10.8X sits comfortably below the S&P 500’s 22.9X, aligning closely with industry averages. Notably, Toll Brothers and PulteGroup trade at substantial discounts with multiples of 8.5X and 8.8X, respectively.
Key Takeaways
Lennar Corporation’s stock presently holds a Zacks Rank #3 (Hold). While the company’s long-term prospects are intriguing, any potential upside will heavily rely on the trajectory of earnings estimate revisions post its Q2 report. Unfortunately, such revisions may dip following weaker-than-anticipated EPS guidance for the current quarter.