Lennar Corporation, a prominent player in the home construction sector, is projected to surpass fiscal third-quarter revenue estimates, as revealed by analysts at Wedbush Securities. The anticipated growth is largely attributed to an increase in home deal closings, although expectations indicate that earnings may fall short of Wall Street projections.
According to Wedbush, Lennar’s revenue is expected to rise by 7% year-over-year, achieving a total of approximately $9.31 billion during the August quarter. This forecast is notably higher than the Refinitiv consensus, which stands at $9.17 billion. The company is also forecasting a substantial 12% year-over-year increase in home delivery units, expecting to close around 21,000 deals.
However, this growth could be counterbalanced by a projected 5% decline in average selling prices. The probable decline in prices is attributed to a strategic discounting and a shift towards smaller square-foot homes compared to the same timeframe in 2023. This assessment comes from analysts Jay McCanless and Brian Violino, who note that Lennar previously provided guidance for deliveries ranging between 20,500 and 21,000 units in June.
In terms of earnings, Wedbush anticipates a dip in earnings per share, projecting a fall to $3.62, down from $3.87 for the same period last year. This outlook positions Wedbush beneath the consensus estimate, which stands at $3.64. The brokerage also foresees a 140 basis-point decline in gross margins, aligning with Lennar's guidance. Looking ahead, order growth for the third quarter is slated to increase by about 5.5% from the previous year to roughly 20,800 units.
This figure is in line with overall market consensus and is near the midpoint of the company's guidance for the quarter. Lennar plans to unveil its third-quarter results on September 19, post-market closure. While the company typically exercises restraint regarding detailed commentary on recent performance during its earnings calls, analysts are speculating that the recent downturn in mortgage rates might be highlighted as a potential catalyst for demand.
McCanless and Violino also express interest in insights concerning Lennar's pricing strategies in a lower mortgage rate environment. 'Given that lower mortgage rates should necessitate a reduced rate buydown, we believe there exists a potential for Lennar to adjust its gross margin guidance for fiscal 2024,' the analysts articulated.
Currently, the gross margin is expected to remain stable year-over-year at 23.3%. Wedbush has left its gross margin estimates for the latter half of the year intact. Stock details are as follows: Price: $175.73, Change: -$4.50, Percent Change: -2.50..