Why Lennar Will Continue Delivering Strong Results

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Lennar (LEN) recently announced a 25 percent increase in revenue. Its total revenue for the recent quarter beat the Zacks Consensus Estimate of $ 1.94 billion. In addition, Lennar reported third quarter 2014 adjusted net earnings of $ 177.8 million, or $ 0.78 per diluted share as compared to third quarter 2013 adjusted net earnings of $ 120.7 million, or $ 0.54 per diluted share. Adjusted net earnings for the quarter also beat the Zacks Consensus Estimate of $ 0.67 by 16.4 percent.

Better performance in the cards

Fresh home deliveries, removing unconsolidated units, expanded to 5,450 homes during the third quarter of 2014 compared to 4,972 homes during the third quarter last year. The home deliveries for all the Homebuilding segments and Homebuilding Other of the company increased significantly. The average home sales price rose to $ 332,000 during the third quarter of 2014 compared to $ 291,000 during the third quarter last year. Sales incentives presented to homebuyers increased from $ 18,700 per home in the third quarter of 2013 and $ 20,300 per home delivered in the second quarter of 2014 to $ 20,400 per home delivered during the third quarter of 2014.

Leaving the unconsolidated entities, new home deliveries increased 9.6 percent on year-over-year basis to 5,450 homes for the given quarter. The growth was primarily enabled by demand expansion in every homebuilding segments.

Backlog increased 22 percent on year-over-year basis for the quarter to 7,290 homes and hence expanding the estimated year-over-year housing revenue by 29 percent for the backlog.

Seeing good traction

Lennar Multi-Family segment sold its initial two apartment properties in the third quarter of fiscal 2014. At present, Lennar has several multifamily products in its ever expanding pipeline worth $ 5 billion and it estimates the segment to accelerate the delivery of quarterly earnings from the concluding 2015 and 2016.

According to Megan McGrath, an analyst with MKM Partners LLC, Lennar seems to have established itself as a top player in the global housing market for the fiscal third quarter, way ahead of its key competitors this summer considering significant order growth, expanding average selling prices, and robust gross margins.

Lennar also achieved the top slot and the best performer position in the S&P’s Supercomposite Homebuilding Index, which rose 3.1 percent now.

During third quarter, Lennar adopted a key strategy to properly manage advertising spend, brokerage commissions, sales incentives and pricing power to enhance its results which led to 9 percent increase in the number of delivered houses to 5,457 with the average price of homes delivered grew from $ 291,000 to $ 332,000.

Conclusion

Hence, Lennar is seeing impressive growth in its performance, and this will allow the company to deliver a strong performance on the stock market.