Lennar Stock Rises Alongside Deliveries — Analysts Say Homebuilder Stimulates Demand, Outpaces Rest Of Industry

Lennar Corp LEN shares fell late Wednesday despite better-than-expected results from the homebuilder. The stock is bouncing Thursday and Raymond James was out with some commentary on the quarter.

Q4 Earnings Rundown: Lennar reported fourth-quarter revenue of $10.17 billion, which beat average analyst estimates of $10.1 billion, according to Benzinga Pro. The homebuilder's top-line results were up 21% on a year-over-year basis.

Lennar turned in fourth-quarter adjusted earnings of $5.02 per share, which beat estimates of $4.89 per share.

Deliveries jumped 13% year-over-year to 20,064 homes, but new orders decreased 15% to 13,200 homes. Lennar's backlog also decreased by 21% to 18,869 homes.

Stuart Miller, executive chairman of Lennar, explained the company adjusted the price of new home sales and homes in backlog to help promote deliveries.

"Our sales volume and pricing have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and there is still demand as we navigate the rebalance between price and interest rates," Miller said.

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Raymond James' Take: Analysts at Raymond James applauded management's pricing adjustments during the quarter.

"LEN further demonstrated its resolve to 'price to market' wherever demand can be stimulated. Net orders only declined 15% y/y in 4Q22, far less of a drop-off than many peers amid surging industry cancellation rates," Raymond James analysts wrote in a new note to clients.

Swift actions from Lennar's management team helped the homebuilder outpace the rest of the industry in terms of orders. Still, Lennar's cancellation rate ballooned to 26% in the quarter, the highest level since 2008, the analysts said.

Although the company was successfully finding buyers in a difficult environment, the pace at which Lennar lowered home prices was impacting the business.

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Lennar now needed to proactively work with buyers in its backlog and margins were taking a hit, Raymond James said, adding margins for the first quarter were expected to be around 21%.

"Additional margin guidance beyond 1Q was not provided, but the starting point for FY23 is already well below the prior 23% consensus projection," the analyst firm said.

Toll Brothers Inc TOL reported its fourth-quarter results at the beginning of the month. The company said its net signed contracts were down 60% in the quarter, but the homebuilder anticipated strong margins in 2023, driven by a strong backlog of 8,098 homes. 

KB Home KBH is set to release its fourth-quarter results on Jan. 11. D.R. Horton Inc DHI is scheduled to report on Jan. 24, according to Benzinga Pro.

LEN Price Action: Lennar has a 52-week high of $116.73 and a 52-week low of $62.54.

The stock was up 2.63% at $93.25 Thursday afternoon at publication.

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