Leading homebuilder Lennar (NYSE:LEN) topped analysts’ estimates for the fourth quarter of Fiscal 2022 (ended November 30, 2022) despite a challenging housing market. Nonetheless, LEN stock was down 2.5% in Thursday’s pre-market trading as the company’s outlook for the fiscal first quarter new orders indicated persistent weakness.
Lennar’s Q4 revenue grew nearly 21% year-over-year to $10.2 billion, driven by a 13% rise in the number of home deliveries and an 8% increase in the average sales price. Adjusted earnings per share (EPS) increased 15% to $5.02. Analysts were expecting adjusted EPS of $4.90 on revenue of $9.97 billion. Q4 gross margin declined significantly as the company adjusted the price of its new home sales and homes in the backlog to promote deliveries and ensure lower cancellations.
New orders decreased 15% to 13,200 homes in Q4 FY22. High mortgage rates and the effect of inflation on consumer spending have impacted home affordability. The company expects new orders in Q1 FY23 in the range of 12,000 to 13,500, reflecting potential slowdown compared to the previous month and 15,747 homes in Q1 FY22.
Commenting on the Q4 performance, Lennar’s Executive Chairman Stuart Miller stated, “Our sales volume and pricing have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and there is still demand as we navigate the rebalance between price and interest rates.”
The company is expected to give further insights about its business and the overall housing market during its earnings call scheduled at 11:00 a.m. EST on Thursday.
Is Lennar Corporation a Buy, Sell, or Hold?
Wall Street is cautiously optimistic about Lennar stock, with a Moderate Buy consensus rating based on eight Buys and three Holds. The average LEN stock price target of $98.90 suggests nearly 9% upside potential. Shares have declined about 22% year-to-date.
