Lennar to Report Q1 Earnings: What Could Drive the Results?

Lennar Corporation LEN is slated to report first-quarter fiscal 2025 results (ended Feb. 28) after the closing bell on Mar. 20.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the last reported quarter, the company’s earnings and total revenues missed the Zacks Consensus Estimate by 3.1% and 2.1%, respectively. Notably, this Miami-based homebuilder surpassed earnings expectations in three of the trailing four quarters and missed on other occasion, with the average surprise being 6.6%.How Are Estimates Placed for Lennar Stock?The Zacks Consensus Estimate for LEN’s earnings per share (EPS) has remained unchanged at $1.76 over the past 60 days. The estimated figure indicates a decrease of 31.5% from the year-ago profit level of $2.57 per share.The consensus estimate for revenues is pegged at $7.51 billion, indicating a 2.7% increase from the year-earlier level.Lennar Corporation Price and EPS Surprise Lennar Corporation price-eps-surprise | Lennar Corporation QuoteFactors That May Influence Lennar’s Quarterly ResultsLennar’s first-quarter fiscal 2025 is expected to be challenging, with revenue growth but a decline in EPS and margins. Mortgage rate volatility and soft demand in December 2024 and January 2025 may weigh on the company's performance, though a seasonal rebound in February could provide some relief.During the fiscal first quarter, the 30-year fixed mortgage rate (per Freddie Mac) has tallied between 6.60% and 7.04%. This indicates an affordability issue for homebuyers as they struggle to make home-buying decisions while navigating through increased borrowing costs.Synergies, such as the dynamic pricing model and digital marketing strategies, alongside increased incentives approach and mortgage rate buydowns, are likely to have supported the company’s underlying prospects. However, the current uncertainties surrounding the housing market are expected to have overshadowed its efforts to target a solid top-line performance.LEN expects home deliveries during the quarter between 17,000 and 17,500 homes, depicting an increase from 16,798 homes delivered in the year-ago period. Delivery ASP is expected to be between $410,000 and $415,000 compared with $413,000 reported a year ago. Our model predicts home deliveries to be up 3.4% to 17,362 units, with the ASP of the delivered units declining 0.3% to $410,580.For the quarter, we expect home sales to grow 3.3% year over year to $7.1 billion. Homebuilding revenues are expected to be $7.16 billion, up 3.3% year over year.New Orders & BacklogLennar expects new orders to be in the range of 17,500-18,000 units, down from 18,176 homes reported a year ago. Our estimate for new orders is currently pegged at 17,813 homes, indicating a 2% decline from a year ago. In high-rate scenarios, affordability issues have been a real cause of concern.Our model predicts a backlog (units and values) of 12,084 homes or $5.85 billion compared with the year-ago quarter’s figures of 16,270 units or $7.43 billion.MarginsThe bottom line of Lennar is expected to have trended south due to its increased approach toward high sales incentives, lower ASP of home deliveries, decreased revenues per square and increased land costs. The company expects the homebuilding gross margin to remain between 19.0% and 19.25%, indicating a decline year over year from 21.8%. Higher mortgage rates likely pressured Lennar’s ability to maintain strong pricing.Meanwhile, Lennar expects homebuilding selling, general and administrative (SG&A) expenses, as a percentage of home sales, to be in the range of 8.7-8.8%. Our model predicts homebuilding SG&A to be 8.8% in the quarter compared with the year-ago quarter’s figure of 8.2%.Financial Services operating earnings are expected to be $100-$110 million. Our model predicts the metric to decline 17.3% to $108.6 million.Strategic MovesOne of the biggest strategic shifts Lennar has undertaken is its spinoff of land assets into a REIT called Millrose. This move may affect its balance sheet and financial reporting. Additionally, Lennar’s investment in Opendoor and other equity holdings may play a role in the company's long-term financial strategy.What Our Quantitative Model Predicts for LEN StockOur proven model does not conclusively predict an earnings beat for Lennar this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here, as you will see below.Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Zacks Rank: Lennar currently carries a Zacks Rank #3.Stocks With the Favorable CombinationHere are some other companies in the Zacks Construction sector that, per our model, also have the right combination of elements to beat on earnings in the quarter to be reported.NVR, Inc. NVR has an Earnings ESP of +4.79% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.NVR reported better-than-expected earnings in two of the last four quarters and missed twice, the average surprise being 4.6%. The company’s earnings for the quarter-to-be-reported are expected to decrease 4.8%.Watsco, Inc. WSO currently has an Earnings ESP of +2.58% and a Zacks Rank of 3.WSO’s earnings for the quarter-to-be-reported are expected to increase 5.1%. The company reported better-than-expected earnings in one of the last four quarters and missed thrice, the average negative surprise being 2.8%.KBR, Inc. KBR currently has an Earnings ESP of +0.38% and a Zacks Rank of 3.KBR’s earnings for the quarter-to-be-reported are expected to increase 14.3%. The company reported better-than-expected earnings in each of the last four quarters, the average surprise being 6.5%.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Watsco, Inc. (WSO): Free Stock Analysis Report KBR, Inc. (KBR): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report NVR, Inc. (NVR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks