Source: davit kirakosyan
Lennar Corporation Q3 Earnings Miss Analyst Expectations
Shares of Lennar Corporation (NYSE: LEN), one of the largest home construction and real estate companies in the US, fell by about 4% on Friday. This drop followed the company’s announcement of its third-quarter earnings, which fell below analyst expectations. The disappointing figures have been attributed to ongoing pressures in the housing market.
Key Financials
The company reported an adjusted EPS (Earnings Per Share) of $2.00, falling short of the consensus estimate of $2.10. This implies that Lennar’s profitability was less than what the market had predicted. In terms of revenue, the company posted $8.8 billion, failing to meet the forecasted figure of $8.97 billion.
Home Sales Performance
Lennar delivered 21,584 homes during the quarter, showing a near-flat performance compared to 21,516 homes delivered a year earlier. However, the home sales revenue experienced a significant decline, dropping by 9% year-over-year to $8.2 billion. This decrease was a direct reflection of a 9% drop in the average sales price, which fell to $383,000 from $422,000.
The drop in average sales price indicates that the company had to lower its prices to attract buyers amidst a tough market environment. The housing market has been facing several pressures including supply chain disruptions, increasing raw material costs, and labor shortages, all of which can lead to a decrease in sales prices.
Profit Margins and Expenses
Another area of concern for Lennar was its gross margin on home sales, which fell dramatically to 17.5% from 22.5% a year earlier. This shrinking margin is a measure of the company’s profitability, and the decrease suggests that the company’s cost of sales is eating more into its revenues than before.
Furthermore, Lennar’s Selling, General, and Administrative (SG&A) expenses increased to 8.2% of home sales, up from 6.7%. This rise in SG&A expenses is a negative indicator as it reflects a rise in the costs associated with selling and managing the company’s products.
Future Outlook
Despite these margin pressures, Lennar reported a 12% rise in new orders to 23,004 homes, suggesting an increasing demand for its homes. Additionally, the company’s backlog stood at 16,953 homes valued at $6.6 billion, a crucial indicator of future revenue.
Looking ahead to the fourth quarter, Lennar projected deliveries of 22,000 to 23,000 homes with an average price of $380,000 to $390,000. The company also expects its gross margins to be about 17.5%.
Final Thoughts
Lennar’s third-quarter earnings report reflects some of the challenges facing the housing market today. While the company has experienced a drop in average sales prices and gross margin, its increase in new orders and backlog suggests that demand remains robust. The company’s future performance will largely depend on how it navigates the ongoing industry pressures, manages its costs, and capitalizes on the opportunities that lie ahead.