With Increase in Home Deliveries, Lennar Corp. Exceeds First-Quarter Expectations

Lennar Corp. posted profit and sales numbers that greatly exceeded expectations for the first fiscal quarter, and it appears the homebuilder is currently poised to continue to outperform expectations in the second quarter after trending upward by almost 1 percent according to recent premarket trade analyses. Of course, it is worth noting that although the homebuilder’s quarterly net income fell compared to one year ago, it still exceeded the earning-per-share consensus and experienced an increase in revenue growth from $1.99 billion to $2.34 billion.

According to our own recent analyses, a renewed economy featuring the promise of sustained growth is part of the reason homebuilders like Lennar Corp. have been able to exceed performance expectations during the early part of 2017. Even though the supply of real estate is limited nationwide — in many cases requiring an increased reliance on off-market expertise — Lennar Corp. was still able to exceed expectations in homebuilding revenue and home deliveries.

In the case of homebuilding revenue, Lennar Corp. succeeded in generating $2.02 billion despite expectations indicating just $1.95 billion. As for the total number of home deliveries, Lennar Corp. again outperformed expectations, increasing home deliveries from 4,806 up to 5,433. In addition to the impact created by early indications pointing to a renewal in economic strength as well as sustained economic growth, the fact that Lennar Corp.’s home-buying incentives increased by $1,100 (up to $22,700 from last year’s average of $21,600) might have also factored into the homebuilder’s ability to outperform its first-quarter expectations.

The increase in the average incentives provided to homebuyers also paired with relatively static average home sales prices, with first-quarter analyses showing an average home sales price of $365,000. Even so, Lennar Corp.’s first-quarter performance is clearly the driving force behind the homebuilder’s stock price rising by 27 percent thus far this year. Lennar Corp.’s year-to-date stock spike of 27 percent compares with a 10 percent increase in the SPDR S&P Homebuilder exchange-traded fund and a 6 percent gain in the S&P 500 SPX.

As Lennar Corp. continues to exceed performance expectations while also outpacing both the SPDR S&P Homebuilder ETF and the S&P 500 SPX, it is fair to wonder whether the homebuilder will be able to sustain its impressive first-quarter performance numbers. Should Lennar Corp. succeed in doing so, it will be interesting to conduct an analysis that properly explores the role of all the different factors enabling the homebuilder to outperform expectations while increasing home deliveries and consistently generating greater homebuilding revenue.

 

References:

http://www.marketwatch.com/story/lennar-beats-profit-and-sales-expectations-as-home-deliveries-increase-2017-03-21?siteid=bnbh

https://seekingalpha.com/article/4056950-lennar-corps-len-ceo-stuart-miller-q1-2017-results-earnings-call-transcript

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