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Lennar Stock Climbs on Goldman Sachs Upgrade to Buy

Lennar's roll out of larger, volume-focused communities should support double digit revenue growth, Goldman Sachs says.

Lennar  (LEN) - Get Lennar Corporation Class A Report powered higher Wednesday after a Goldman Sachs analyst upgraded the second-largest U.S. homebuilder to buy from neutral and buy and boosted her price target to $140 from $108.

Shares of the Miami company were up 4.6% to $109.93 at last check.

Other homebuilders, such as D.R. Norton  (DHI) - Get D.R. Horton, Inc. Report, Toll Brothers  (TOL) - Get Toll Brothers, Inc. Report, and KBH Home  (KBH) - Get KB Home Report were also climbing.

Analyst Susan Maklari said Lennar's roll out of larger, volume-focused communities should support double digit revenue growth and EBIT margin expansion, according to the Fly.

In addition, Maklari said, the announced spinoff of non-core assets could result in a 500 basis point improvement in the homebuilding return on equity from the third-quarter's 22%, moving Lennar "closer to, if not ahead of, best in class peers." 

The analyst said she expects company-specific catalysts, along with an underlying supportive macro backdrop, to drive outperformance of the shares.

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Last month, BofA analyst Rafe Jadrosich reinstated coverage of Lennar with a buy rating and $120 price target.

Given better scale, including a leading market share position in the key U.S. homebuilding markets, an "everything Included" building strategy and tech integration, Jadrosich expects Lennar to outperform on a relative basis versus peers, he said.

In September, Lennar posted modestly weaker-than-expected third quarter earnings and cautioned the supply chain disruptions would hit its top and bottom line over the final months of the year.

Lennar said adjusted earnings for the three months ending in August, the group's fiscal third quarter, were $3.27 per share, a penny shy of the Wall Street consensus forecast, on revenue of $6.9 billion.

Company executive chairman Stuart Miller said the company and the homebuilding industry as a whole "continued to experience unprecedented supply chain challenges which we believe will continue into the foreseeable future."

Lennar is scheduled to report earnings on Dec. 15.