This is not the time to buy Lennar, but the time is coming

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Lennar Corporation (NYSE: LEN ) At the higher end of the housing spectrum is an array. Its balance sheet has been in great shape over the years. The problem is not the supply-demand situation, as that is firmly in favor of all homebuilders. The problem is in the interim perspective, which is rapidly worsening.

The sudden rise in interest rates, the persistent quality of inflation and the impact on the housing market are profound. Q4 and FY 2022 are solid years for Lennar, KB Home (NYSE: KBH), TR Horton Inc. (NYSE: DHI) And others, the guidance points to a sharper contraction Revenue and earnings in 2023.

“Our sales volume and pricing have clearly been affected by rising interest rates, but there is a significant national shortage of housing, particularly workforce housing, and there is still demand as we navigate the rebalancing between prices and interest rates,” said executive chairman Stuart. Miller.

Lennar falls on weak guidance

Lennar’s Q4 results Demonstrates both the strength of demand in the housing market and the impact of rising interest rates. The company’s revenue rose 21% year-over-year (YOY) to $10.17 billion and beat the consensus, but guidance remains weak. For Q4, sales were driven by a 13% increase in deliveries and an 8% increase in home prices, leading to strong results on the bottom line as well. Margins contracted on both the gross and household levels, but less than expected, resulting in adjusted earnings in the double digits and adjusted EPSup 16%, including share repurchase support. Adjusted earnings of $5.02 beat by $0.12, but that’s where the strength ends.

Expectedly, no news is good. The company expects a 15% contraction in new orders and a similar rate in FQ1. Backlog decreased by 21% due to an increase in cancellations running at 26% compared to only 12% in the previous year. Backlog and new orders are even more worrisome, as both these combined with price declines saw net values ​​decline by 24% and nearly 25%, respectively. As for guidance, the company expects deliveries for Q1 and FY2023 below analyst consensus, and there is a high risk of underperformance, hence the stock moving lower.

The analyst’s feeling was convincing to Lennar

Analyst sentiment at Lennar is solid, but take this with a grain of salt. The rating of 16 analysts is a very weak “moderate buy” and is on two upgrades that came out before the F2023 guidance was released. The price target is up, but there is only 10% upside and there are other risks. Stocks have come under less pressure in the first two months of December 2022 with companies raising pressure. In light of this, the stock could see some upside but take profits in the $92 range.

The chart was good going into the report, but the best that can be said right now is within the stock range. The top of the range is near $92 and will remain so until homebuilding sales improve. The latest reading on the NAHB Home Builder Sentiment Index doesn’t suggest that will be the case Very soon. Based on what the FOMC just said, that time may not come until 2024. There will be plenty of opportunities to buy this name in the medium term.

Now is not the time to buy Lennar, but the time is coming

Before you even consider Lennar, you need to ask this.

MarketBeat tracks Wall Street’s top-rated and best-performing research analysts and the stocks they recommend to clients on a daily basis. As MarketBeat identified Five stocks The best analysts quietly whisper to their clients, buy now before the broader market catches up… and Lennar is off the list.

Although Lennar currently has a “moderate buy” rating among analysts, top analysts believe these five stocks are great buys.

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