Raymond James Downgrades Lennar On Valuation, Still Likes Long-Term Prospects

Homebuilder Lennar Corporation LEN last week reported an EPS miss in its fiscal first-quarter results but other metrics were "encouraging," according to Raymond James.

The Analyst

Raymond James' Buck Horne downgraded Lennar from Strong Buy to Outperform with an unchanged $55 price target.

The Thesis

Lennar said it earned 74 cents per share in its February-ending quarter, which missed expectations of 77 cents per share. Horne said the miss can be attributed to a 12 percent year-over-year dip in total home deliveries due to unusually wet weather and lower land sales contributors.

On the other hand, multiple metrics in the quarter continue to justify a bullish stance on the stock, the analyst wrote. Specifically, net orders exceeded the high-end of management's guidance by 5 percent, year-over-year order comparisons improved sequentially and management reaffirmed its prior full year guidance of delivering more than 50,000 homes.

Lennar is still well positioned to win market share in the "choppy" homebuilder market while maintaining its attractive profit profile and generate notable operating cash flows, the analyst said. Coupled with the stock trading at 1.36 times adjusted book value versus 1.5 times for its peers, shares continue offering "one of the stronger" risk-reward opportunities in the space.