PreMarket Prep Stock Of The Day: Lennar

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

There are two important factors that may dictate how an issue will react to an earnings report other than the raw numbers. The first one being the overall mood of the markets on that day and the other being recent news from one of its peers.

Lennar Corp LEN was facing a double whammy on Monday when it reported earnings after the close. The Street’s reaction to the report and the corresponding price action makes it the PreMarket Prep Stock Of The Day.

Bad Day To Report: Even though the S&P 500 index staged a stunning rally in the final hour of Monday’s session, it still ended with a substantial loss on a point and percentage basis. That coupled with the soft price action on Friday’s quadruple witch expiration, for once, the bears had the upper hand on the bulls.

Also, looking a bit longer-term, the cash index has been lower in eight of the last 10 sessions, which has been a rarity this year.

D.R. Horton Not Helping: Before the open on Monday, D.R. Horton DHI lowered its guidance for homes closed and consolidated revenues for the fourth quarter and fiscal year. Once again, it was due to continuing significant disruptions in the supply chain, including shortages and delivery delays in certain building materials and tightness in the labor market.

As a result, fourth-quarter consolidated revenue guidance was slashed from $7.9-$8.4 billion to $7.7-$7.9 billion, versus an $8.2 billion estimate.

The combination of the bad day in the markets and bad news from its peer instigated a decline of $2.98, or 2.94%, to $98.30 for Lennar on Monday.

Mixed Q3 Report: After the close, the company reported quarterly earnings of $3.27 per share, which missed the analyst consensus estimate of $3.28. The company reported quarterly sales of $6.94 billion, which beat the analyst consensus estimate of $6.86 billion by 1.18%.

PreMarket Prep Take: When the issue was being discussed on the show, it was trading at the $96 area. Co-host Dennis Dick expressed his cautious stance on the entire housing sector.

“For a long time, the housing sector as the 'good as it gets environment.' Now with the threat of higher rates, rising building costs and the pandemic buying spree over, I am not looking to go long issues in the sector for a long-term investment," Dick said.

The author of this article didn't think the premarket low ($94) would come into play and buyers would have to choose another entry-level to get long or cover a short. On the upside, sellers may be lining up at the close or the mark ($98.30) after being so deep in the red previously.

Price Action: After a much lower open ($96.39 versus $98.30), it continued in that direction but found support ahead of the premarket low, only reaching $95.51 and reversed course. The ensuing rally found resistance just above Monday’s close ($98.30) at $98.56 and reversed course once again.

Lennar actively traded in the mid-$97 handle and closed Tuesday's session down 53 cents at $97.77.

The discussion on Lennar from Tuesday’s show can be found here: