Real Estate

Earnings Preview: What To Expect From Lennar On Wednesday

Lennar Corp. is scheduled to report earnings after Wednesday’s close. The stock hit a record high of $117.54/share in 2021 and is currently trading near $83/share. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:

Earnings Preview:

The company is expected to report a gain of $2.60/share on $6.11 billion in revenue. Meanwhile, the so-called Whisper number is a gain of $2.75/share. The Whisper number is the Street’s unofficial view on earnings.

A Closer Look At The Fundamentals:

The housing market is very strong and that has helped the company enjoy very healthy double digit earnings and sales growth in each of the past four quarters. It is also encouraging to see annual earnings per share steadily grow nicely over the last few years. Savvy shareholders are also happy to return on equity come grow nicely in each of the past four quarters.

A Closer Look At The Technicals:

Technically, the stock is not acting well and has been falling since the fourth quarter of 2021. The stock is currently trading ~30% below its 2021 high which means that it is in a private bear market (a bear market on Wall Street is defined as a decline of >20% below a recent high). If the stock gaps down after reporting earnings that cause more technical damage and that will not bode well for the housing market.

Housing Market Looks Toppy

My research shows that housing stocks tend to serve as a great leading indicator for the broader housing market on Main Street. Just about every other major housing stock is in a bear market and if housing stocks continue to fall that will bode poorly for housing prices on Main Street. Only time will tell for sure what happens but this is a strong relationship I have noticed over the years. If you look back at the early 2000’s, you will see housing stocks bottomed and enjoyed huge runs until they topped out in 2005-2006 (before the 2008 housing crash). Then, they bottomed in late 2011-early 2012 and that led to a major housing boom on Main Street. Now, they are topping out again, so it is something on my radar and worth mentioning especially because the Fed is starting to raise rates. That is another big force that could impact housing prices in the future.

Pay Attention To How The Stock Reacts To The News:

From where I sit, the most important trait I look for during earnings season is how the market and a specific company reacts to the news. Remember, always keep your losses small and never argue with the tape.

Disclosure: Lennar has been featured in FindLeadingStocks.com.

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