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The stock price of Lennar Corporation closed in US Dollars. The stock has gained 14% year-to-date and 12% over the past 12 months. The company posted better-than-expected results for the first quarter of 2023 amid a challenging environment. Here are some key points from the earnings report:
Quarterly figures
In Q1 2023, Lennar’s total revenue rose 5% year over year to $6.5 billion, beating estimates. GAAP EPS increased 22% to $2.06 and although adjusted EPS fell 21% YoY to $2.12, it beat projections.
Strategies and trends
In its quarterly conference call, Lennar stated that the overall housing market has been affected by higher mortgage rates, which has also affected the ability and confidence of homebuyers. The company must adjust the base price, increase incentives, and / or provide mortgage purchases to maintain or obtain the targeted sales target in most of the market. This strategy to generate sales has come at the cost of gross profit.
In Q1, Lennar saw strong performances in markets like Florida, New Jersey and San Diego, which continue to benefit from low inventory, strong local economies, and job growth. In markets like Orlando, Atlanta, Chicago, Virginia and Minnesota, the company will have to make some significant price adjustments in order to gain sales momentum.
Although Lennar’s new sales orders declined 10% year-over-year in Q1, they have been consistent since the fourth quarter of 2022 as well as every month of the first quarter. The cancellation rate also dropped from 26% in Q4 to 21% in Q1.
The company continued to make progress on its land lighting strategy during the first quarter. At the end of Q1, the annual supply for owned residential sites increased to 1.9 years from 2.7 years and the percentage of controlled residential sites increased to 68% from 63% last year. At the end of Q1, Lennar had 1,217 communities, which was up 1% from the year-ago period. It expects to increase the community count in the high single digits by the end of the fiscal year.
Outlook
Lennar expects new orders to be between 16,000 and 17,000 for the second quarter of 2023 and deliveries to be between 15,000 and 16,000. Average sales price is approximately $435,000-445,000. Gross margin is expected to be 21-21.5% while EPS is expected to be $2.10-2.55 in Q2. For the full year 2023, the company expects deliveries between 62,000 and 66,000.
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