With the fourth quarter earnings season officially starting later next week, one company that has already posted strong end-of-the-year results is home builder Lennar Corporation LEN.
After beating Q4 top and bottom line expectations in mid-December, Lennar has remained on a long list of homebuilders that have largely outperformed the broader market with other notable names being D.R. Horton (DHI), Toll Brothers (TOL), and KB Home (KBH).
Starting the new year, let’s see if now is a good time to buy Lennar’s stock after the company’s strong Q4 results last month.
Q4 Review
Co-CEO Stuart Miller alluded to the fact that the well-documented production deficit stemming from the pandemic and chronic supply shortage continued to result in housing demand outweighing short supply. To that point, Lennar still has a backlog of 14,982 homes with a dollar value of $6.6 billion.
Despite high mortgage rates, Miller stated operating conditions remained constructive for Lennar’s overall strategy of focusing on production and sales pace over price, generating cash flow, and increasing returns on equity and assets while driving a strong bottom line.
Correlating with such, Q4 earnings of $5.17 per share surpassed the Zacks Consensus of $4.64 a share by 11% and rose 3% from the prior-year quarter. On the top line, Q4 sales of $10.96 billion came in 6% better than expected and jumped 7% from $10.17 billion a year ago. More impressive, Lennar has now surpassed earnings expectations for 19 consecutive quarters posting an average earnings surprise of 21.68% in its last four quarterly reports.
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Growth & Outlook
Lennar’s annual earnings are forecasted to rise roughly 1% in fiscal 2024 and climb another 11% in FY25 to $15.92 per share. Even better, FY25 EPS projections would represent 177% growth since the pandemic with 2019 earnings at $5.74 a share.
Total sales are projected to be up 5% this year and rise another 6% in FY25 to $38.34 billion. Plus, FY25 sales projections would be a 72% increase from pre-pandemic levels with 2019 sales at $22.26 billion.
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Recent Performance
Despite very favorable Q4 results, Lennar’s stock is down -5% since reporting on December 14. Still, Lennar’s stock has soared +62% over the last year which has easily topped the S&P 500’s +25% but has trailed the Zacks Building Products-Home Builders Markets’ +80% along with Toll Brothers +101%, KB Home’s +93%, and D.R. Horton’s +68%.
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Bottom Line
At the moment, Lennar Corporation’s stock currently lands a Zacks Rank #3 (Hold). It wouldn’t be surprising if a healthy correction is looming for Lennar and other top-performing homebuilder stocks after an incredible year in 2023. Despite the possibility of better buying opportunities ahead, Lennar’s long-term prospects remain compelling.
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Lennar Corporation (LEN) : Free Stock Analysis Report
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
KB Home (KBH) : Free Stock Analysis Report
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
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