Lennar Corporation (NYSE:LEN) just released its third-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 6.1% to hit US$5.9b. Lennar also reported a statutory profit of US$2.12, which was an impressive 36% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Lennar's 14 analysts are now forecasting revenues of US$23.3b in 2021. This would be a modest 3.0% improvement in sales compared to the last 12 months. Statutory per share are forecast to be US$7.19, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$22.2b and earnings per share (EPS) of US$6.67 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
It will come as no surprise to learn that the analysts have increased their price target for Lennar 9.2% to US$84.50on the back of these upgrades. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Lennar, with the most bullish analyst valuing it at US$95.00 and the most bearish at US$62.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Lennar's revenue growth will slow down substantially, with revenues next year expected to grow 3.0%, compared to a historical growth rate of 21% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that Lennar is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Lennar's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Lennar analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Lennar that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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