On Friday, Goldman Sachs maintained its Neutral stance on Lennar Corporation (NYSE:LEN) stock, with a consistent price target of $182.00. Lennar's third fiscal quarter adjusted earnings per share (EPS) of $3.90 surpassed both Goldman Sachs' estimate of $3.60 and the FactSet consensus of $3.64. The better-than-expected results were attributed to several factors, including a 9% year-over-year increase in homebuilding (HB) revenues, which exceeded Goldman Sachs' projection of a 5% rise.
The company's homebuilding EBIT margin, including amortized interest, was 26 basis points higher than anticipated, coming in at 16.3%. This margin improvement contributed an additional $0.07 to the EPS. Tax benefits added $0.08 to the EPS, while non-core segments and the share count contributed $0.07 and $0.01, respectively. However, non-controlling interest and other items had a negative impact of $0.06 on the EPS.
Lennar also reported a 5% year-on-year increase in unit orders, which was in line with Goldman Sachs' expectations and a significant drop from the 37% increase observed in the third fiscal quarter of 2023. The number of communities rose by 2% year-over-year, slightly below Goldman Sachs' prediction of a 3% increase. This led to a roughly 2% rise in the monthly sales pace to 5.5 homes per community, which is higher than the third fiscal quarter average of 3.3 homes from 2015 to 2019.
In the upcoming conference call, attention will be focused on updates regarding consumer demand and conditions, key factors affecting profit margins, strategic initiatives, and the management of cash. Additionally, details on the proposed taxable spin-off of $6-8 billion worth of owned land will be of particular interest to investors and analysts alike.
In other recent news, Lennar Corporation reported a rise in Q3 earnings to $1.16 billion, or $4.26 per share, a notable increase from the previous year's $1.1 billion, or $3.87 per share. This growth is attributed to robust demand for housing amid a historically low supply and a decrease in fixed mortgage rates, which has drawn in more buyers. These financial results provide a snapshot of the current dynamics in the housing sector, where limited inventory continues to bolster demand and profitability for major homebuilders.
Moreover, Lennar's Q3 results surpassed analyst estimates with adjusted earnings per share of $3.90 and revenue of $9.42 billion. The company also reported a 5% year-on-year increase in new home orders to 20,587 homes, reflecting the strong demand in the housing market. Home deliveries also rose by 16% to 21,516 homes compared to the same period last year.
Looking ahead, Lennar expects to deliver between 22,500 and 23,000 homes in the fourth quarter, with new orders projected to be between 19,000 and 19,300 homes. The company forecasts an average sales price of about $425,000 and gross margins to remain flat compared to Q3. These recent developments indicate a strong performance by Lennar in the housing market.
InvestingPro Insights
As Lennar Corporation (NYSE:LEN) continues to navigate the housing market, real-time data from InvestingPro underscores the company's financial positioning. Lennar holds a significant market capitalization of $52.33 billion, reflecting its substantial presence in the industry. The company's P/E ratio stands at 11.93, which, when adjusted for the last twelve months as of Q2 2024, slightly increases to 12.58. This valuation metric suggests that investors are willing to pay a premium for Lennar's earnings, potentially due to its status as a prominent player in the Household Durables industry.
InvestingPro Tips highlight Lennar's strong liquidity position, with the company holding more cash than debt on its balance sheet, which is a reassuring sign for investors concerned about financial stability. Additionally, Lennar has demonstrated a capacity to cover interest payments with its cash flows, a testament to its operational efficiency. For those interested in dividend consistency, Lennar has maintained dividend payments for 47 consecutive years, which could be a compelling factor for income-focused investors. With a dividend yield of 1.06% and a substantial increase in dividend growth of 33.33% in the last twelve months as of Q2 2024, the company shows a commitment to returning value to shareholders.
Investors may also take note of Lennar's recent stock performance, with a price total return of 63.87% over the past year and a current price that is 99.3% of its 52-week high. Such metrics indicate a strong recent history of stock appreciation, which might be of interest to growth-oriented investors. For further insights, InvestingPro offers additional tips on Lennar, providing comprehensive analysis for those seeking to delve deeper into the company's financials and market potential.
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