On Thursday, Evercore ISI adjusted its price target for Lennar Corporation (NYSE:LEN), a leading home construction company, to $237.00, down from the previous target of $238.00. The firm maintained its Outperform rating on the stock. This adjustment followed Lennar's second-quarter 2024 earnings release, where the company reported an adjusted diluted earnings per share (EPS) of $3.38. This figure fell slightly below Evercore ISI's estimate of $3.44 but surpassed the Street consensus of $3.23.
Lennar's financial performance showcased mixed results, with certain metrics exceeding expectations while others fell short. The company's financial services income reached $147 million, exceeding the estimated $113 million. Additionally, the number of home closings and the average selling price of closed homes were slightly higher than anticipated, at 19,600 and $426,000 respectively. Gross margins also beat estimates at 22.6%.
However, Lennar's new orders showed a year-over-year increase of 19%, which was marginally below the expected 20% growth. Other income was reported at $60 million, falling short of the $70 million forecast. Despite these variances, Lennar continues to maintain a strong balance sheet with a net debt-to-capital ratio of -5%. The company has also been active in repurchasing its stock, buying back approximately $603 million worth, which was below the analyst's forecast of $750 million. Furthermore, Lennar has repaid $554 million in debt, surpassing the $450 million estimate.
The company's stock price experienced a 5% decline, partially attributed to ongoing uncertainties regarding the proposed spin-off of its land assets. Lennar has increased the amount of land to be spun off and filed its draft registration, indicating that the spin-off will not be debt-financed but is expected to receive a cash infusion. This strategy may limit near-term share repurchase opportunities.
Evercore ISI highlighted Lennar's transition towards a production-oriented, asset-light business model as a positive development. The firm anticipates that Lennar's valuation could see an uptick as more details about the land spin-off emerge in the coming quarters. Following the second-quarter results, Evercore ISI has updated its full-year EPS forecasts for Lennar, setting them at $14.39 for fiscal year 2024, down from $14.95, and at $16.64 for fiscal year 2025, reduced from $17.27. The price target of $237 is based on a multiple of 14.5 times the firm's 2026 earnings estimate, discounted back six quarters at a 10% rate.
InvestingPro Insights
Following the recent earnings report from Lennar Corporation (NYSE:LEN), a deeper dive into the company's financial health and market performance using InvestingPro data can provide investors with a clearer picture. With a substantial market capitalization of $41.02 billion and a strong price-to-earnings (P/E) ratio of 10.1, Lennar demonstrates a robust financial standing. The company's revenue growth over the last twelve months as of Q2 2024 stands at 6.34%, reflecting a steady upward trajectory in its business operations.
InvestingPro Tips highlight that Lennar holds more cash than debt on its balance sheet and has a high shareholder yield, which may be attractive to investors seeking stability and potential returns. Additionally, the company's ability to maintain dividend payments for 47 consecutive years underscores a commitment to shareholder value. For investors interested in further analysis and tips on Lennar, there are 12 additional InvestingPro Tips available which could provide more nuanced guidance on the stock. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Despite some analysts revising their earnings downwards for the upcoming period, Lennar's stock has shown a notable 23.91% one-year total return, indicating a strong performance over a longer timeframe. The company's liquid assets exceeding short-term obligations, coupled with the ability to cover interest payments from cash flows, contributes to a financially sound profile that may reassure investors of its resilience in the market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.