Govt Tried To Kill Housing: A Homebuilder Surprises With Q3 New Orders Up 37%

Thursday after close, Lennar Corporation LEN reported quarterly earnings of $3.91 per share, which beat the analyst consensus estimate of $3.51. 

Quarterly sales of $8.73 billion beat the analyst consensus estimate of $8.45 billion but fell 2.28% from the same period last year.

Goldman Sachs (Buy, Price Target $142) says results were consistent with their channel checks and investor expectations as demand held above seasonal norms through the summer.

With cycle times down 32 days sequentially in the quarter, Lennar guided F4Q closings of 22,000 units at the mid-point, 5% ahead of its model and 8% above consensus. 

That said, the expectation for F4Q orders of 16,700, down, is 5% below Goldman Sachs' model, though 2% above consensus. 

New orders increased 37% to 19,666 homes, while the new orders dollar value increased 30% to $8.6 billion, above the F2015-19 average of 3.3 and an 11% increase over F2Q23, with the average order price down 4% sequentially. 

Lennar ended the quarter with a unit backlog down 18% YOY, providing 3.4 months of visibility based on GS's current estimates.

RBC Capital Markets (Underperform, Price Target $113.00) writes that the earnings yielded robust outcomes. Still, there is a perception that the profit margin forecast may slightly fall short of what the investment community had anticipated. At the same time, the order guidance is mostly in line with their expectations. 

RBC analyst Mike Dahl says LEN would typically see some incremental sequential cost leverage in 4Q on higher deliveries, so flat to slightly up gross margin percentage, while solid at these levels, potentially reflects some increased incentive use.

Price Action: LEN shares are down 3.62% at $113.44 on the last check Friday.

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