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Lennar (LEN) to Report Q2 Earnings: What's in the Cards?

Lennar Corporation LEN is slated to report results for second-quarter fiscal 2020 (ended May 31), before the opening bell on Jun 16.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 53% and 2.9%, respectively. Notably, this Miami-based homebuilder surpassed earnings expectations in seven of the trailing eight quarters.

On a year-over-year basis, earnings and revenues grew 71.6% and 16.5%, respectively, buoyed by higher deliveries and continued operating leverage on technological efforts.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $1.29 over the past 60 days. The estimated figure indicates a decrease of 0.8% from $1.30 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $5.29 billion, suggesting a 4.9% decrease from the year-ago reported figure of $5.56 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

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Factors to Note

Lennar’s fiscal second-quarter Homebuilding revenues (accounting for 93.4% of total revenues) are expected to have decreased from the year-ago level, given disruptions caused by the coronavirus outbreak in the United States. Although the company, which shares space with PulteGroup PHM in the Zacks Building Products - Home Builders industry, built homes and worked remotely, shortage of building lots and fear of general economic slowdown might have also impacted sales in the quarter to be reported.

Nonetheless, lower mortgage rates and demand for affordable housing from multiple demographic groups are likely to have given a boost to its order growth. The company has been shifting the business mix to lower-priced homes. This is expected to have boosted its sales absorption pace to some extent. Commentary from Lennar's peers like Meritage Homes Corporation MTH and D.R. Horton DHI about a rebound and improvement in demand in the latter half of April and through May signals improved order growth.

The Zacks Consensus Estimate for the company’s Homebuilding revenues is pegged at $4.96 billion, which indicates a decrease of 4.5% from $5.2 billion in the year-ago period but a 18.9% increase from $4.17 billion in the last reported quarter.

The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 12,484 homes, indicating a decrease of 1.9% from a year ago but an increase of 21% sequentially. Average sales price of homes delivered is expected to be $392,000, indicating a decline of 3.9% from the year-ago period and 2.2% sequentially.

From the margins perspective, lower average sales prices have been threatening Lennar’s margins. The company’s focus on targeting more first-time homebuyers and lower-priced homes has been impacting margins. This is likely to have hampered its performance in the quarter to be reported. Nonetheless, Lennar has been focused on continuous improvement in the SG&A (selling, general and administrative) line owing to operating leverage and investments in technology.

What the Zacks Model Unveils

Lennar has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — to increase the odds of an earnings beat.

Earnings ESP: The company has an Earnings ESP of +29.46%. 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 #3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
Meritage Homes Corporation (MTH) : Free Stock Analysis Report
 
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