NEW YORK (TheStreet) -- Major US homebuilder Lennar Corporation (LEN) - Get Lennar Corporation Class A Report reported better-than-expected third-quarter results, prompting shares to jump 3.4% to $35/71 in mid-day trading.
For the quarter ended August 31, Lennar reported $120.7 million in net earnings, compared with $87.1 million for the year-ago quarter, a 14% increase in new orders, and a 46% increase in revenue to $1.6 billion.
"We are very pleased with our quarterly results, reporting earnings per share of 54 cents," said CEO Stuart Millar in a company press release.
By 11am New York time, 3.29 million shares changed hands compared to its average daily volume of 5.67 million. Overall, Lennar is leading the S&P 500 which is down 0.03%.
Home prices rose 12.4% over the last 12 months, according to the latest July S&P/Case-Shiller Home Price Indices. While all cities in the 20-City Composite increased over the last four months, the rate of growth has softened.
"Since April 2013, all 20 cities are up month to month; however, the monthly rates of price gains have declined," David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said. "More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked."
TheStreet Ratings team rates Lennar Corporation as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate Lennar Corporation a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Lennar's very impressive revenue growth greatly exceeded the industry average of 21.7%. Since the same quarter one year prior, revenues leaped by 53.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Even though the current debt-to-equity ratio is 1.43, it is still below the industry average, suggesting that this level of debt is acceptable within the Household Durables industry.
- In its most recent trading session, Lennar has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Lennar has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Lennar increased its bottom line by earning $3.10 vs. 48 cents in the prior year. For the next year, the market is expecting a contraction of 38.3% in earnings ($1.91 vs. $3.10).
- The gross profit margin for Lennar is rather low; currently it is at 24.07%. Regardless of Lennar's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, Lennar's net profit margin of 9.63% compares favorably to the industry average.
- You can view the full analysis from the report here: LEN Ratings Report
Written by Keris Alison Lahiff.