Homebuilder Lennar’s Shares Rise on Earnings Beat; Target Price $89

Miami-based home construction company Lennar reported better-than-expected earnings in the fourth quarter, largely driven by rising housing demand due to record low mortgage rates amid the COVID-19 pandemic, sending its shares up about 4% in extended trading on Wednesday.

The largest home construction company in the United States said its net earnings in 2020 were $882.8 million in the fourth quarter ended November 30, 2020, or $2.82 per diluted share, compared to $674.3 million, or $2.13 per diluted share in the fourth quarter of 2019. That was higher than the market expectations of $2.35 per share.

Revenue dipped to $6.83 billion, from $6.97 billion a year earlier, better than the Wall Street consensus estimate of $6.65 billion.

Lennar forecasts financial services operating earnings between $110 million – $115 million in the first quarter of 2021 and $400 million – $425 million in the fiscal year 2021.

Following this release, Lennar’s shares surged about 4% to $77.09 in extended trading on Wednesday after closing 0.56% higher at $74.29. The homebuilder’s stock is up over 30% so far this year.

Analyst Comments

“4Q20 results are encouraging as Lennar (LEN) is achieving a sales pace above guidance as well as realizing pricing power, leading to expanded margin. Lennar ramped upstarts in the quarter, increasing +28% YoY in an effort to make up for production lost earlier in the year due to the pandemic, and to feed still-significant incoming demand,” said Carl E. Reichard, equity analyst at BTIG.

“FY21 guidance looks especially good; the midpoint of LEN’s delivery range is +8% above our estimate and GM is 80 bps ahead of what we modelled. The 1Q21 guidance has orders 18% above our estimate and GM 210 bps ahead, although closings are a little light (2% below our estimate). All in, this was a notably strong quarter, with an exceptionally robust outlook, and we expect shares to perform well tomorrow,” E. Reichard added.

Lennar Stock Price Forecast

Six equity analysts forecast the average price in 12 months at $89.60 with a high forecast of $94.00 and a low forecast of $77.00. The average price target represents a 20.61% increase from the last price of $74.29. From those six analysts, three rated “Buy”, three rated “Hold” and none “Sell”, according to Tipranks.

Lennar had its price target upped by Wedbush from $81.00 to $86.00. They currently have an outperform rating on the construction company’s stock. UBS initiated with a “Neutral” rating and target price of $77. Truist Securities raised the price target to $93 from $62. Bank of America boosted their price objective to $90 from $80 and gave the company a neutral rating. Zacks Investment Research upgraded to a buy rating from hold and set a $81 price objective.

We think it is good to buy at the current level and target $89 in the long-term as 150-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

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