On Jun 27, Zacks Investment Research upgraded Lennar Corporation LEN to a Zacks Rank #1 (Strong Buy). Most of the estimates moved north as Lennar performed impressively in the second quarter of fiscal 2015, beating the Zacks Consensus Estimate for both revenue and earnings – for the second quarter in a row. The second quarter results were announced on Jun 24.
Why the Upgrade?
Lennar’s second-quarter 2015 adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 65 cents by 21.5%. Earnings jumped 29.5% year over year driven by an increase in revenues.
Total revenue of $2.39 billion beat the Zacks Consensus Estimate of $2.05 billion by 16.6%. Revenues also grew 31.3% year over year as homebuilding, financial services and multi-family segments performed significantly well in the quarter.
Homebuilding revenues increased 30.1% year over year. Home sales were up 30% year over year, driven by pricing gains and a double-digit increase in home deliveries.
The company decreased sales incentives during the quarter, indicating strong demand for its homes. Lennar’s sales incentives comprised 5.8% of home sales revenues in the second quarter, lower than 5.9% in the prior year quarter and 6.3% in the first quarter of 2015.
Lennar management commented that the housing market improved steadily throughout the second quarter of 2015, driven by increasing wages and employment, reasonable affordability levels, limited supply and an improved rentals market. In fact, management believes that the housing market is prepared well for “multi-year growth ahead”.
Other Stocks to Consider
Stocks worth considering in the building sector include DR Horton Inc. DHI, MDC Holdings Inc. MDC and Beazer Homes USA Inc. BZH While Beazer Homes sports a Zacks Rank #1, MDC Holdings and DR Horton hold a Zacks Rank #2 (Buy).
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