Lennar Corporation (LEN) delivered a mixed bag of results for its third quarter of fiscal 2024, exceeding Zacks Consensus Estimates for both earnings and revenue but falling short on certain key metrics. The company’s revenue growth was driven by its strategy of maintaining a steady production rate, ensuring a consistent flow of new homes despite the fluctuating interest rate environment. Lennar cleverly utilized pricing strategies, incentives, marketing investments, and dynamic pricing insights to navigate the market and maintain sales volume. However, earnings for the quarter dipped slightly compared to the previous year, leaving investors with a sense of unease.
Lennar reported adjusted earnings per share (excluding mark-to-market gains on technology investments and one-time items in its Multifamily segment) of $3.90, surpassing the Zacks Consensus Estimate of $3.62 by 7.7%. While this figure exceeded expectations, it marked a 0.3% decline from the previous year’s earnings of $3.91 per share. Revenue, on the other hand, came in at $9.42 billion, exceeding the Zacks Consensus Estimate of $9.29 billion by 1.4% and showing a year-over-year increase of 7.9% from $8.73 billion.
The homebuilding segment, which constitutes the core of Lennar’s business, generated revenues of $9.05 billion, up 8.7% from the prior-year quarter. Home sales contributed the lion’s share of this revenue, totaling $9.02 billion, an 8.8% increase from the previous year. However, the company’s gross margin on home sales took a hit, falling to 22.5% from 24.2% in the prior year, primarily due to decreased revenues per square foot and increased land costs.
Investors were particularly concerned by the company’s cautious outlook for the fourth quarter, indicating a potential slowdown in the housing market. Lennar expects deliveries of 22,500-23,000 homes, a decline from the 23,795 homes delivered in the previous year. The company also anticipates a decrease in the average selling price (ASP) of homes delivered, projecting it to be around $425,000 compared to $441,000 in the prior year. Additionally, while the company expects the gross margin on home sales to remain flat year over year, it represents a significant decrease from the 24.2% recorded in the previous year.
In conclusion, Lennar’s third-quarter results were a mixed bag, with positive top-line growth but concerns about profitability and future prospects. The stock’s immediate decline in after-hours trading reflects investor sentiment, highlighting the importance of robust earnings and a confident outlook for the housing market’s performance going forward.
