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Lennar Corporation LEN is slated to report results for second-quarter fiscal 2022 (ended May 31), before the opening bell on Jun 21.
In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 3.9% and 0.2%, respectively. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in the trailing 12 quarters.
On a year-over-year basis, fiscal first-quarter earnings and revenues grew 32.4% and 16.5%, respectively.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has remained unchanged at $3.95 over the past 60 days. The estimated figure indicates an increase of 33.9% from $2.95 reported in the year-ago quarter. The consensus mark for revenues is pegged at $8.13 billion, suggesting a 26.4% increase from the year ago reported figure of $6.43 billion.
Let’s see how things have shaped up for this company.
Lennar Corporation Price and EPS Surprise
Lennar Corporation price-eps-surprise | Lennar Corporation Quote
Factors to Note
Rising mortgage/interest rates and affordability concerns are creating many hurdles for the prospective buyers, thereby affecting demand. Nonetheless, for Lennar, a solid backlog level is expected to have benefited the quarter’s sales.
Home sales of this homebuilding company are expected to have increased in the fiscal second quarter from the year-ago level, backed by the lack of available supply. Higher pricing is also expected to have benefited the fiscal second quarter’s Homebuilding revenues (accounting for more than 93% of total revenues).
The Zacks Consensus Estimate for Homebuilding revenues is pegged at $7.82 billion, which indicates an increase of 29.7% from the year-ago period.
For the fiscal second quarter, Lennar expects deliveries in the range of 16,000-16,300, indicating an improvement from the year-ago reported figure of 14,493. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 16,199 homes, indicating an increase of 11.8% from a year ago. The company expects average sales price at $470,000, suggesting an increase from $413,000 a year ago. Lennar also expects new orders in the range of 17,800-18,200, pointing to an increase from 17,157 reported in second-quarter fiscal 2021.
Higher sales price and modest demand are likely to have expanded margins. The company expects the homebuilding gross margin to be at 28-28.25%, pointing to an increase from 26.1% a year ago, mainly in a robust pricing environment. Lennar has been focusing on controlling construction costs and prudently managing sales prices, which may have benefited gross margin in the fiscal second quarter.
The company has been focusing 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, in the range of 6.8-7%. A year ago, the metric was recorded at 7.6%.
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 #4 (Sell). 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 for their respective quarters to be reported.
KBR, Inc. KBR has an Earnings ESP of +2.67% and holds a Zacks Rank #2.
KBR is expected to register 10.3% growth in earnings for the to-be-reported quarter. Notably, KBR reported better-than-expected earnings in all of the last four quarters, with the average surprise being 12%.
Floor & Decor Holdings, Inc. FND has an Earnings ESP of +3.93% and a Zacks Rank #3.
FND’s earnings for the to-be-reported quarter are expected to be in line with the year-ago level. The company reported better-than-expected earnings in three of the last four quarters but missed on one occasion, with the average surprise being 5.8%.
Martin Marietta Materials, Inc. MLM has an Earnings ESP of +3.26% and a Zacks Rank #3.
MLM is expected to register 10.2% growth in earnings for the to-be-reported quarter. The company reported better-than-expected earnings in one of the trailing four quarters and missed on the other three occasions, with the average negative surprise being 10.2%.
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