Now that’s how you construct a homebuilder rally.
Getty Images Lennar (LEN) reported earnings today that were solid enough to boost the entire sector, despite mixed numbers from fellow homebuilder KB Home (KBH). The Wall Street Journal has the details:
For the quarter ended Aug. 31, Lennar reported a profit of $120.7 million, or 54 cents a share, up from $87.1 million, or 40 cents a share, a year earlier. The latest quarter included a $67.2 million tax provision, while the year-ago quarter included a $12.8 million tax benefit. Revenue rose 46% to $1.6 billion.
Analysts polled by Thomson Reuters most recently had forecast adjusted earnings of 45 cents on revenue of $1.56 billion.
Belus Capital Advisors’ Brian Sozzi looks for the cloud in the sunny numbers:
Taking Lennar’s “stellar” 3Q earnings this AM and comparing them to 2Q (the sequential look is the go-to analytical comparison when covering homebuilders, especially during current market conditions) a couple things stand out:
1. CEO sounded more cautious in prepared remarks regarding business trends, basically confirming demand has softened from the last time he was on a press release in June.
2. Deliveries: +37% vs. +39% 2Q
3. New orders: +14% vs. +27% 2Q
4. New orders down in the Central and Southeast Florida vs. up in 2Q.
Note these are some of the same sequential occurrences (slowing) we saw in the recent report from Toll Brothers (TOL). Very curious on how the stock acts today (and the entire homebuilder complex, such an Owens Corning (OC) and Home Depot (HD)); does market focus on slowing trends that were caused by the summer rate spike (and the prospect they may continue due to worsening housing affordability) or a possibly re-acceleration in demand with mortgage rates back in check?
It appears to be the latter. Lennar has gained 3.6% to $35.77, while KB Home has risen 1.4% to 17.26 and Toll Brothers has advanced 2.5% to $33.45. As for for Owens Corning, it’s gained 0.6% to $39.38, while Home Depot has risen 0.1% to $75.99.
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