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Earnings Preview for Lennar (LEN)

by | Dec 12, 2021

Lennar (LEN) reporting earnings on 12/15 after the close with the Street looking for $4.16 on $8.5B in sales, up 20% Y/Y. Next quarter is guided to $2.86 and $6.52B while the FY is $14.28 and $26.63B. Shares have a strong history closing higher in six of the last eight with an average closing move of 3% and a max move of 13.8%. The current implied move is 3%, a big below the average implied move of 4.85%. The $35.63B company trades 8.05X earnings, 1.4X sales, and 12.8X cash with a small yield. LEN has been executing well despite a difficult environment where supply and labor pressures are expected to continue into Q4 and early 2022. They were cautious on announcing 2022 deliveries guidance in September due to both of these overhangs but they remain in strong position to grow in the low-double digit range with demand for new orders strong. Analysts have an average target for shares of $120 with a Street High $166. Goldman upgrading to Buy on 12/1 citing the company’s roll out of larger, volume focused communities which should support double digit revenue growth and EBIT margin expansion. In addition, the announced spinoff of non-core assets could result in a 500 basis point improvement in the homebuilding return on equity from Q3’s 22%, moving Lennar closer to, if not ahead of, best in class peers. Short interest is 2.55%. Hedge fund ownership fell 1.6%. Castle Hook Partners a buyer of stock while Sanders Capital a top holder with 10.4M shares. On the chart, LEN broke out of a weekly bull flag recently above $110 and measured move to $130 as a continuation of the bigger bull trend. Options flow has been bullish with recent buyers in the December 23rd (W) $120 calls, May $115 calls, and December $115 calls over 8000X for $1.3M. The February $90 puts were sold to open 4000X on 11/29 for $730K.

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