Lennar Corporation (LEN - Free Report) is scheduled to report results for third-quarter fiscal 2022 (ended Aug 31) after the closing bell on Sep 21.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 18.7% and 2.9%, respectively. It is to be noted that this Miami-based homebuilder surpassed earnings expectations in the trailing 13 quarters.

On a year-over-year basis, fiscal second-quarter earnings and revenues grew 59% and 30%, respectively.
 

The Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved down to $4.77 in the past 60 days. The estimated figure indicates an increase of 45.9% from the $4.78 reported in the year-ago quarter. The consensus mark for revenues is pegged at $9.04 billion, suggesting a 30.3% increase from the year-ago reported figure of $6.94 billion.
 

Lennar Corporation Price and EPS Surprise

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

Let’s see how things have shaped this company.
 

Factors to Note

Despite a persistent affordability issue and fear of rising mortgage/interest rates, Lennar is likely to have gained on a solid backlog level in the to-be-reported quarter. During the fiscal second-quarter earnings call, the company noted that it has good visibility in the fiscal third quarter backed by a strong backlog. This will thereby help it generate solid revenue.

Home sales of this homebuilding company are expected to have increased in the fiscal third quarter from the year-ago level, backed by the lack of available supply and higher pricing.

The Zacks Consensus Estimate for Homebuilding revenues is pegged at $8.48 billion, which indicates an increase of 29.3% from the year-ago period. The consensus estimate for backlog (units and values) for the to-be-reported quarter is currently pegged at 25,650 homes or $14.35 billion compared with the year-ago quarter’s figures of 25,819 units or $11.98 billion.

For the fiscal third quarter, Lennar expects deliveries in the range of 17,000-18,500, indicating an improvement from the year-ago reported figure of 15,199. The consensus estimate for deliveries for the to-be-reported quarter is currently pegged at 17,572 homes, indicating an increase of 15.6% from a year ago.

The company expects the average sales price to be marginally up from the $483,000 reported in the fiscal second quarter. This compares favorably with the $428,000 reported a year ago. The consensus mark for the same is pegged at $484,000.

Higher sales prices are also expected to have expanded margins. The company expects the homebuilding gross margin to be at 28.5-29.5%, pointing to an increase from 27.3% a year ago, mainly in a robust pricing environment. Lennar has been focusing on controlling construction costs and prudently managing sales prices, which may have benefited gross margin in the fiscal third quarter.

The company has been focusing 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, in the range of 6-6.5%. A year ago, the metric was recorded at 7%.

Lennar expects new orders in the range of 16,000-18,000, pointing to an increase from 16,277 reported in third-quarter fiscal 2021. Considering the mid-point of the guidance, the estimated figure reflects a fall of 4.4% year over year. During the fiscal second-quarter earnings call, LEN also signaled that the weakness in the overall market is likely to have dented the fiscal third quarter’s order pattern. The consensus estimate for new orders is currently pegged at 14,847 homes, indicating a fall of 8.8% from a year ago, owing to the expected softness in housing demand.
 

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 #4 (Sell). 

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