On Jun 28, Zacks Investment Research upgraded
) to a Zacks Rank #1 (Strong Buy) following the announcement of
its quarterly results late last month.
Why the Upgrade?
Lennar reported second-quarter fiscal 2013 (ended May 31) results
on Jun 25. Second quarter fiscal 2013 adjusted earnings of 43
cents per share beat the Zacks Consensus Estimate of 33 cents by
30.3%. Earnings jumped 105% from the prior-year quarter earnings
of 22 cents. A double-digit growth in homebuilding revenues and
solid margins boosted earnings growth.
Total revenue in the quarter grew 53.0% year over year to $1.43
billion as both the Homebuilding and Financial Services segments
did significantly well. Revenues also beat the Zacks Consensus
Estimate of $1.32 billion by 8.3%. Homebuilding revenues grew 59%
year over year to $1.28 billion. Home closings, new orders and
backlog were all up in double-digits from the year-ago period.
Lennar has been witnessing rising earnings estimates on the back
of strong top line and bottom line beat in second-quarter fiscal
2013. The company benefited from the housing market recovery,
which continued to boost both volume and prices for this leading
national homebuilder despite recent concerns over rising interest
rates. The company has been witnessing double-digit surprise for
the past four quarters with an impressive average beat of 46.62%.
Despite recent increases in mortgage rates, the company witnessed
increased demand in all its markets, which indicates a solid
recovery in the U.S. housing market. Increased affordability due
to higher rentals is boosting demand. Supply, however, remains
limited due to low inventories, both for new and existing homes.
Home prices have thus moved up sharply with increased market
demand and limited supply.
The Zacks Consensus Estimate for fiscal 2013 increased 5.2% to
$1.83 per share as most of the estimates were revised higher over
the last 7 days. For fiscal 2014, more than half of the estimates
were revised higher over the same time frame, lifting the Zacks
Consensus Estimate by 2.4% to $2.59 per share.
Lennar has been witnessing solid year-over-year growth in new
home orders, average selling prices (ASPs) and home closings for
the past few quarters. We believe that the company is performing
better than its peers by increasing selling prices, improving
volumes, making opportunistic land acquisitions and consistently
delivering decent profit margins. In addition to its homebuilding
operations, growth will also come from its multiple platforms
including Rialto, Mutlifamily and Financial Services.
Other Stocks to Consider
Other stocks in the homebuilding sector that are performing well
and deserve a mention include
D. R. Horton Inc.
Taylor Morrison Home Corporation
), both carrying a Zacks Rank #1 (Strong Buy) and
Ryland Group Inc.
) carrying a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
TAYLOR MORRISON (TMHC): Free Stock Analysis
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