Lennar (LEN) Set to Report Earnings
Lennar (LEN) will announce results 6/16 after the close with the Street looking for $2.36 EPS and $5.88B in revenues (+11.2%) with Q3/FY21 seen at $2.97/$7.1B and $11.40/$25.6B. LEN shares have closed higher six of its last seven reports with an average six quarter max move of 8.96%. The $27.85B residential construction leader trades 8.2X Earnings, 6.5X EBITDA and 7.15X FCF with a 1.08% dividend yield. LEN revenues are seen rising 13.8% this year and 7.5% in 2022 with the housing market cooling a bit recently but still a very favorable backdrop of strong demand, limited supply and low mortgage rates leading to high affordability. LEN is balancing sales and pricing to help protect profitability given inflationary headwinds and tight supply across building materials. LEN has also been transitioning to larger, volume-based communities with growth expected to come through in the back half of the year. Analysts have an average target of $110 on shares with short interest down 20% Q/Q to 3.3% of the float. BTIG raised its target to $117 in March after its quarterly report noting the key transformation with intentions to spin off all or part of many of its non-core businesses and sees the formation of a single family rental JV a step forward in LEN’s ability to grow and monetize assets and improve returns to lead to a higher valuation. On the chart LEN shares recently dipped under key support at YTD VPOC and now the 200-day moving average and YTD lower value support at $86 coming into focus as well as VWAP off the October 2020 lows. LEN options are pricing in a 3.75% earnings move and 30-day IV Skew at +3.1 compares to the +1.5 52-week average. LEN has recently seen some smaller buyers of November $92.5 and $85 puts while 5000 August $82.5 short puts sit in open interest and 2200 January $90 short puts. LEN has seen 5000 August $82.50 puts accumulate with buyers. The technical pattern and flow along with the housing market cooling and material costs rising suggests a likelihood of a move lower and the August $92.5/$85 put spread for $2.75 provides a nice reward/risk.