On Tuesday, Evercore ISI adjusted its price target on shares of Lennar (NYSE:LEN), reducing it to $236.00 from the previous $240.00 while keeping an Outperform rating on the stock.
Lennar reported third-quarter 2024 adjusted diluted earnings per share (EPS) of $3.90, surpassing both the firm's $3.67 forecast and the Street consensus of $3.64. These figures do not include approximately $39 million in mark-to-market gains from investments or a $179 million one-time sale of assets, which was partially offset by a $90 million one-time write-off of non-core assets.
The company delivered strong top- and bottom-line results, supported by healthy selling, general and administrative (SG&A) leverage. However, gross margins were softer than expected in the quarter and are anticipated to remain so in the fourth quarter. Lennar's third-quarter gross margin of 22.5% fell short of both the firm's estimate and management's guidance of 23%. Furthermore, for the fourth quarter, management expects gross margins to stay at 22.5%, which is below the firm's estimate of 25%.
Lennar's full-year 2024 implied gross margin is now approximately 90 basis points lower than the guidance provided three months prior. The company has used gross margin as a "shock absorber" to prioritize consistent volume. Comparatively, Lennar's sequential change in absorptions was 10 percentage points stronger than D.R. Horton's June quarter results, but its sequential move in gross margins was 90 basis points worse.
In the quarter, Lennar exceeded expectations with home closings of 21.4 thousand units versus the firm's estimate of 20.8 thousand and reported an SG&A percentage of -8.7% against the forecasted -9.4%. However, new orders saw a slight miss, with a +4.5% increase compared to the +7.0% estimated.
In other recent news, BofA Securities has maintained a neutral rating on Lennar's stock, while Citi, RBC Capital Markets, and Goldman Sachs have also recently updated their outlooks on the company.
InvestingPro Insights
In light of the recent analysis by Evercore ISI on Lennar (NYSE:LEN), incorporating real-time data from InvestingPro can provide additional context to the company's financial health and market performance. Lennar holds a strong position with a market capitalization of approximately $50.52 billion, reflecting investor confidence in the company. The adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q3 2024 stands at 12.12, suggesting that the stock may be reasonably valued in relation to its earnings. Furthermore, Lennar has demonstrated a solid revenue growth of 9.04% during the same period, indicating a robust expansion in its business operations.
From an investment standpoint, two InvestingPro Tips highlight key aspects of Lennar's financials. Firstly, the company maintains a healthy balance sheet, holding more cash than debt, which is a reassuring sign for investors concerned about financial stability. Additionally, Lennar has managed to maintain dividend payments for an impressive 47 consecutive years, showcasing its commitment to returning value to shareholders. For readers interested in a deeper dive into Lennar's performance and potential investment strategies, there are 13 additional InvestingPro Tips available at https://www.investing.com/pro/LEN.
With a strong return over the last three months, as evidenced by a 23.76% price total return, and trading near its 52-week high at 95.87% of that value, Lennar's stock price movements reflect a positive sentiment in the market. These metrics, combined with the company's profitability over the last twelve months and its position as a prominent player in the Household Durables industry, suggest that Lennar is navigating the current market environment with resilience. Investors may find these insights from InvestingPro valuable when considering Lennar's stock for their portfolios.
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