Shares of Lennar Corp (NYSE:LEN) tanked in early trading on Friday, after the company’s second-quarter revenues missed Wall Street’s expectations.
The Lennar Analyst: Citizens JMP Securities analyst James McCanless maintained a Market Perform rating on the stock.
He also noted several Q2 highlights:
- Total revenues of $7.9 billion missed consensus of around $8 billion
- Lennar’s 20,500 closings came in-line with the guidance
- Average closing price of $371,000 missed consensus by around $2,000 and represented a decline of 5% year-on-year
- GAAP gross margin contracted by 220 basis point (bps) year-on-year to 15.6%, missing expectations
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The Lennar Thesis: The company reported its GAAP earnings at $1.24 per share, above last year’s $1.81 per share, McCanless said in the note.
"Lennar attributed the y/y gross margin decline to higher land costs versus last year and less revenue lift from the lower average closing price," the analyst wrote.
Lennar’s incentives declined to 12.9%, from the previous quarter's 14.1%, McCanless noted. "Management indicated in the EPS release that the average consumer’s balance sheet appears to be improving, and when possible, consumers are moving ahead with a home purchase," he further wrote.
The consumer commentary was positive for Lennar and other entry-level builders, the analyst stated.
He added, however, that Lennar lowered its full-year closing guidance to 82,000-83,000 from 85,000.
LEN Price Action: Shares of Lennar had declined by 4.31% to $90.86 at the time of publication on Friday.
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