Why Lennar (LEN) Stock Is Advancing Today

NEW YORK (TheStreet) -- Shares of Lennar Corp. (LEN) are up 3.25% to $40.40 in pre-market trade after the homebuilder reported fiscal third-quarter earnings that beat analysts' estimates as it sold more homes at higher prices, Bloomberg reports.

Net income in the three months through August was $177.8 million, or 78 cents per share, compared with $120.7 million, or 54 cents, a year earlier, the company said. The average of 20 analyst estimates was for earnings of 67 cents a share, according to Bloomberg data.

Lennar has boosted earnings by raising prices and using its large size to save money on materials and land purchases as demand for new houses remains uneven, Bloomberg said.

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Orders increased 23% to 5,889 homes with a value of $1.9 billion, from 4,785 homes and $1.5 billion a year ago.

Revenue jumped 26% to $2 billion. The number of houses delivered was up 9%t to 5,457.

TheStreet Ratings team rates LENNAR CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate LENNAR CORP (LEN) a BUY. This is driven by a few notable 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, increase in stock price during the past year, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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 CORP reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, LENNAR CORP reported lower earnings of $2.14 versus $3.10 in the prior year. This year, the market expects an improvement in earnings ($2.58 versus $2.14).
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Household Durables industry average. The net income increased by 0.2% when compared to the same quarter one year prior, going from $137.44 million to $137.72 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Household Durables industry and the overall market, LENNAR CORP's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: LEN Ratings Report
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