Lennar Post-earnings Analysis
Chart done on daily timeframe. Shares of homebuilding giant Lennar are falling after the company reported their earnings, which met the quarterly expectations, but failed to meet future forecasts. The company reported profits of $3.45 per share this part quarter vs estimates of $3.33, and revenues of $8.77B vs the expected $8.2B. Both figures mark healthy growth compared to the previous year, despite higher interest rates in the real estate market. Lennar did have to cut their average price per home from $449,000 to $426,000 in the quarter, which is a sign that consumers are gaining more control over pricing.
Lennar’s pain point was their home delivery forecasts, which came in just below the 20,917 unit expectations. This seemed to outweigh their phenomenal performance and ability to continue posting growth in an uncertain market. Growth has definitely slowed down from the 2021 and 2022 years, but profitability has stayed consistently strong. The company’s balance sheet also reflects a very healthy asset to liabilities ratio of 4:1, which nearly 40B in assets and 12B in liabilities. Although shares are up more than 100% in the last 24 months, the company’s price to earnings ratio is still at an attractive multiple of 11, a bargain compared to the healthy 15-25 average.
Looking ahead:
The housing market has stayed surprisingly strong during the high interest rate environment, but it is well-know that interest rates often take 18-24 months to begin impacting the economy. Being a homebuilder, Lennar could be one of the companies affected by the high rates in the coming quarters, which could also explain why shares are reacting negatively despite the earnings beat. We are bullish on Lennar in the decades to come, but they may face some headwinds in the coming 2-3 years.