Lennar Corporation LEN reported tepid fourth-quarter fiscal 2024 results, wherein its adjusted earnings and total revenues missed the Zacks Consensus Estimate and declined year over year.
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The quarter’s performance was directly hit by a lag in the home sales pace due to a high mortgage rate scenario and low average selling price (ASP). Due to the affordability issue, the new orders during the quarter also showcased a downward trend.
To counter the affordability issues, the company adjusted its ASP, incentives and margins to foster home sales and manage its inventory levels. However, these initiatives fell short amid the uncertainties surrounding the housing market. Moving forward into fiscal 2025, to counter the market uncertainties, LEN aims to focus on its volume-based strategy for driving sales and implement an asset-light, land-light business model.
LEN stock plunged 8.9% in Wednesday’s after-hours trading session. Investors’ sentiments are likely to have been hurt by the dismal fiscal fourth-quarter results along with tepid first-quarter fiscal 2025 guidance (when compared year over year) across its key metrics.
LEN’s Quarterly Numbers
Lennar’s adjusted earnings per share (EPS) (excluding mark-to-market gains on technology investments) of $4.03 missed the Zacks Consensus Estimate of $4.16 by 3.1%. In the year-ago quarter, the company reported an adjusted EPS of $5.17.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Total revenues of $9.95 billion also lagged the consensus mark of $10.16 billion by 2.1% and declined 9.3% year over year from $10.97 billion.
Segment Details of Lennar
Homebuilding: This segment’s revenues totaled $9.55 billion, down 9.2% from the prior year quarter. Under the Homebuilding umbrella, home sales contributed $9.5 billion to total revenues, down 9% from a year ago. Land sales accounted for $39.6 million, down from $63.5 million in the prior year quarter. The Other homebuilding unit contributed $8.1 million to homebuilding revenues, down from $9.7 million a year ago.
Home deliveries declined to 22,206 units from 23,795 units in the prior year quarter. The reported figure lagged our model’s projection of 22,987 units for the quarter. The ASP of homes delivered was $430,000, down 2.5% from the year-ago figure due to pricing to market through an increased use of incentives and product mix. We had predicted ASP to be $424,850 for the quarter.
New orders declined 2.7% from the year-ago quarter to 16,895 homes. Moreover, the potential value of net orders fell year over year to $7.18 billion from $7.28 billion.
Backlog at the fiscal fourth-quarter end declined 21.9% from the year-ago quarter to 11,633 homes. Potential housing revenues from backlog decreased year over year to $5.37 billion from $6.63 billion.
The gross margin on home sales was 22.1% for the quarter, down 210 basis points (bps). Notably, the reported figure came below our projection of 22.5% for the quarter. The decline was mainly due to decreased revenues per square foot and increased land costs year over year. This was partially offset by a decline in costs per square foot due to lower costs of materials as LEN continued to focus on construction cost savings.
SG&A expenses — as a percentage of home sales — increased 60 bps to 7.2% due to lower leverage because of lower volume and average sales price.
Financial Services: The segment’s revenues inched down year over year to $304.6 million from $304.7 million. Operating earnings for the quarter also declined to $154.5 million from $169.1 million a year ago.
Lennar Multi-Family: Revenues of $88.9 million in the segment were down from $140.8 million in the prior year quarter. The segment registered an operating loss of $0.2 million for the quarter compared with a loss of $12.2 million a year ago.
Lennar Other: The segment’s revenues totaled $4.7 million, down from $6.6 million a year ago. Its operating earnings were $0.5 million against a loss of $125.4 million a year ago.
Sneak Peek at LEN’s Fiscal 2024
Lennar’s total revenues during fiscal 2024 were $35.44 billion, up from $34.23 billion reported in fiscal 2023. Homebuilding revenues increased to $33.91 billion from $32.66 billion reported a year ago.
Adjusted EPS (excluding mark-to-market gains and other one-time items) of $13.86 was down year over year from $14.25 reported last year.
Lennar’s Financials
At the fiscal 2024-end, Lennar had homebuilding cash and cash equivalents of $4.66 billion, down from $6.27 billion at the end of fiscal 2023. It has no outstanding borrowings under the $2.9 billion revolving credit facility, thereby providing $7.6 billion of available capacity.
The total homebuilding debt was $2.26 billion, down from $2.82 billion at the fiscal 2023-end. Homebuilding debt to capital at the fiscal 2024-end was 7.5%, down from 9.6% at the fiscal 2023-end.
The company repurchased 13.6 million shares for $2.1 billion in fiscal 2024.
LEN’s Fiscal Q1 2025 Guidance
For the first quarter of fiscal 2025, the company expects deliveries to be in the range of 17,000 - 17,500 homes, depicting growth from 16,798 homes delivered in the year-ago period. The company expects the ASP of the delivered units to be in the range of $410,000-$415,000, compared with the ASP of $413,000 reported a year ago.
The gross margin on home sales is expected to be between 19% and 19.25%, down from 21.8% reported a year ago. SG&A expenses, as a percentage of home sales, are likely to be in the range of 8.7-8.8%, up year over year from 8.2%.
New orders are likely to be within 17,500 -18,000 units, down from 18,176 homes reported a year ago.
Financial Services operating earnings are expected to be between $100 million and $110 million, down from $131 million a year ago.
LEN’s Zacks Rank & Stocks to Consider
Lennar currently carries a Zacks Rank #4 (Sell).
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The consensus estimate for FIX’s 2025 sales and EPS indicates an increase of 7.9% and 20.8%, respectively, from a year ago.
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The Zacks Consensus Estimate for MTZ’s 2025 sales and EPS indicates an increase of 8.6% and 45.5%, respectively, from a year ago.
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