) is set to report its first quarter 2013 results on Mar 20
before the market opens. Last quarter it posted a 30.23% positive
surprise. Let's see how things are shaping up for this
Growth Factors This Past Quarter
Lennar's fourth quarter earnings beat the Zacks Consensus
Estimate and, the year-ago figure on the back of double-digit
growth in homebuilding revenues and solid operating margins.
Double-digit growth in revenues in the quarter was driven by both
pricing and volume growth in a stabilizing housing market.
However, the ever-rising cost of construction is a matter of
concern for Lennar. LEN has also been witnessing weak performance
from the Rialto sector since the past few quarters.
Lennar has witnessed solid year-over-year growth in new home
orders, average selling prices and home closings in all the
quarters of 2012. Margins have also been above average despite
rising costs, driven by strong operating leverage.
Lennar expects to continue to achieve further profitability in
fiscal 2013, despite expectations of higher input costs, on the
back of rising home prices, strong liquidity position, solid
backlog position, strategic land acquisitions and new community
The backlog conversion ratio is expected to decline to around
75% in the first quarter and thereafter improve to approximately
90% per quarter thereafter. Gross margin is expected to be
between 23% and 24% on an average in fiscal 2013 compared to
22.7% in 2012.
The Zacks Consensus Estimate for the first quarter stands at
14 cents. Estimates have seen a mixed movement after announcement
of the fourth quarter results. The Zacks consensus estimate for
fiscal 2013 has moved up by 0.6% to $1.58 over the past 90
We believe that the company is performing better than its
peers by increasing sales prices, reducing incentives, improving
volumes and making opportunistic land acquisitions. However, the
new home demand remains at historically low levels due to the
current weak U.S. economic conditions and tight mortgage lending
Sustainable increases in housing and housing demand for the
long-term will require the overall economy to strengthen;
including further job growth and less restrictive lending
environment, which we believe will take time.
The stock carries a Zacks Rank #3 (Hold). We caution against
stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into
the earnings announcement, especially when the company is seeing
negative estimate revisions momentum.
Other Stocks to Consider
Stocks in the homebuilding sector that are performing well and
deserve a mention include
) carrying a Zacks Rank #1 (Strong Buy), and
D. R. Horton Inc.
Hovnanian Enterprises Inc.
), carrying a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
HOVNANIAN ENTRP (HOV): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
NVR INC (NVR): Free Stock Analysis Report
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