Earnings Preview: Can Lennar Corporation (LEN) sustain its uptrend in Q4?

Homebuilder Lennar Corporation (NYSE: LEN) is set to report fourth-quarter results next week, after delivering strong quarterly sales and earnings performance this year. The resilient housing market and interest rate cuts bode well for the company, complementing the stable demand scenario, but home affordability issues and pricing pressure remain a concern.

The performance of Lennar’s shares has not been very encouraging over the past three months. The management’s cautious guidance drove the stock lower soon after the Q3 earnings release in September when it was trading at an all-time high. The shares have gained about 15% in the past twelve months. Given Lennar’s brand power and ability to capitalize on market opportunities, LEN remains a strong investment option.

Estimates

The fourth-quarter report is slated for release on Wednesday, December 18, at 4:30 pm ET. Market watchers forecast year-over-year decreases in Q4 revenue and earnings. It is estimated that earnings dropped to $4.15 per share in the final three months of FY24 from $5.17 per share last year. The forecast for revenue is $10.11 billion, vs. $10.97 billion in Q4 2023.

From Lennar’s Q3 2024 earnings call:

“Demand remains very strong, and the migration to lower interest rates will further activate that demand. Lower interest rates will enhance affordability which will enable many more families to access and attain homeownership at the entry level, while growing families will be able to unlock value from existing homes, enabling them to move up to more bedrooms and more living space. More listings for existing homes will provide supply of entry-level homes while driving more demand for move-up product.”

Results Beat

For the third quarter, the company reported revenues of $9.4 billion, up 8% from the same period of fiscal 2023. Revenues of the core Lennar Homebuilding segment grew 8%. New orders increased 5% year-over-year to 20,587 units and deliveries rose 16% to 21,516 homes during the three months. The management said it expects new orders to be between 19,000 and 19,300 in the fourth quarter, and deliveries in the range of 22,500 to 23,000. The average sales price is expected to be $425,000 in Q4.

Net earnings attributable to shareholders were $1.2 billion or $4.26 per share in Q3, compared to $1.1 billion or $3.87 per share in the year-ago quarter. Excluding mark-to-market gains on technology investments and one-time items in the Multifamily segment, adjusted profit was $3.90 per share. Both revenue and earnings topped the market’s expectations, continuing the recent trend.

In Growth Mode

The company has effectively navigated recent macro challenges including the inflation-induced strain on housing affordability, leveraging its competitive prices and a strategy focused on catering to all kinds of buyers, ranging from first-time homeowners to more mature customer demographics. Last month, Lennar revealed plans to acquire the homebuilding operations of residential homebuilder Rausch Coleman, which is expected to allow the company to expand its footprint to new markets.

On Wednesday, Lennar’s shares opened slightly above $160 and traded lower in the early hours of the session. The average price for the last 52 weeks is $163.91.