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Lennar (LEN) to Report Q4 Earnings: Key Factors to Note

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Lennar Corporation LEN is slated to report results for fourth-quarter fiscal 2021 (ended Nov 30) after the closing bell on Dec 15.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 0.9% but revenues missed the same by 4.5%. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in 14 of the trailing 15 quarters.

On a year-over-year basis, fiscal third-quarter earnings and revenues grew 54.2% and 18.2%, respectively.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $4.14 over the past 30 days. The estimated figure indicates an increase of 46.8% from $2.82 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $8.53 billion, suggesting a 25% increase from the year-ago reported figure of $6.83 billion.

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

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

Home sales of this homebuilding company are expected to have increased in the fiscal fourth quarter from the year-ago level, given resilient housing market conditions in the United States, backed by historically low mortgage rates, lack of available supply and a highly motivated buyer.

Higher deliveries and pricing are expected to have benefited Lennar’s fiscal fourth-quarter Homebuilding revenues (accounting for more than 93% of total revenues).

The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $8.03 billion, which indicates an increase of 26.3% from the year-ago period.

For the fiscal fourth quarter, Lennar expects deliveries in the range of 18,000 homes, indicating an improvement from the year-ago reported figure of 16,090. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 18,016 homes, indicating an increase of 12% from a year ago. The company expects average sales price to be $445,000, suggesting an increase from $393,000 a year ago. Lennar also expects new orders in the 15,200-15,400 range, indicating an increase (considering the mid-point of the guided range) from 15,214 reported in fourth-quarter fiscal 2020.

From the margin perspective, higher average sales and strong demand are likely to have expanded margins. The company expects homebuilding gross margin to be 28%, pointing to an increase from 21.5% a year ago, mainly on a robust pricing environment.

Lennar has been focusing on controlling construction costs and managing sales price prudently, which may have benefited gross margin in the fiscal fourth quarter.

Again, it has been focused 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, to be 6.7%. 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 #2.

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.

Louisiana-Pacific Corporation LPX has an Earnings ESP of +0.57% and holds a Zacks Rank #3.

Louisiana-Pacific has been benefiting from favorable OSB prices and an improving housing market backdrop. Also, strategic business transformation, effective cash management and inorganic moves are likely to boost its performance in the future.

PotlatchDeltic Corporation PCH has an Earnings ESP of +13.41% and a Zacks Rank #3.

PotlatchDeltic is expected to gain from solid housing momentum, in turn driving sales volume. Also, its focus on accretive acquisitions bodes well.

Weyerhaeuser Company WY has an Earnings ESP of +5.68% and a Zacks Rank #3.

Weyerhaeuser has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.


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