Lennar On Track To Beat Earnings Estimates Again; Stock Has Over 20% Upside Potential

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

The company will release earnings for the third quarter ended August 31, 2021 after the market closes on September 20, 2021.

According to Zacks research, Lennar expects to deliver 15,800-16,100 homes in the third-quarter fiscal 2021 with a gross margin of 27-27.5%. The company reaffirms a delivery range of 62,000-64,000 homes for fiscal 2021 but raises the ASP expectation to $420,000 from $400,000.

Lennar shares surged over about 30% so far this year. The stock closed 0.8% lower at $98.59 on Monday.

Analyst Comments

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

Lennar Stock Price Forecast

Ten analysts who offered stock ratings for Lennar in the last three months forecast the average price in 12 months of $123.50 with a high forecast of $160.00 and a low forecast of $100.00.

The average price target represents a 25.27% change from the last price of $98.59. From those 10 analysts, six rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

CFRA raised the target price by $15 to $130. Royal Bank of Canada lifted their price objective to $100 from $97 and gave the company a “sector perform” rating. JPMorgan boosted their target price to $141 from $115. Barclays boosted their target price to $110 from $105 and gave the company an “equal weight” rating.

We think it is good to buy at the current level and target $123 in the long-term as the 200-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

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