Lennar's Earnings Add To Optimism Around Homebuilders

| About: Lennar Corporation (LEN)

Lennar Corp. (NYSE:LEN) earnings before the bell this morning add to yesterday's optimism surrounding homebuilders. The company reported adjusted earnings of $0.21 per share compared with analyst estimates calling for 17 cents. Analysts had forecast revenues to grow 15.9% to $885.7 million, but the company beat those estimates with total sales of $930.2 million, a year-over-year increase of 21.7%.

The dollar value of the company's backlog at quarter end increased 67.5% year-over-year and the number of homes in the backlog increased 60.7%. The average price of homes delivered in the quarter increased $5,000 for the third quarter of 2011 to $250,000.

The company believes buying houses gives customers value over renting, and is seeing an increase in traffic and interest in home buying. However the recovery remains uneven across the country and tight lending standards slow the recovery. Lennar believes the economy is recovering, and household creation will increase as houses with multiple generations living in the spilt up as income improves.

Lennar has clearly been a great investment, since the lows from early last October the stock has gained 140%. The 50 DMA provided support for much of this move higher, and today's early morning move well above that moving average could prove bullish for the stock. Lennar does has some short term resistance at around $30/ Should this move from earnings carry it above that level it may be a good time to get long the stock.

KB Home (NYSE:KBH), which reacted positively to Lennar's earnings, will also report earnings this Friday before the market opens. Analysts are looking for a loss of 34 cents per share, compared with a loss of 89 cents a year ago. KB Home missed earnings estimates by $0.35 last quarter, after beating by $0.15 the quarter before that. Estimates for the company have been taken down considerably. Estimates for fiscal year 2012 which ends in November have been reduced over the past 90 days from a loss of $0.72 per share to a loss of $1.02 per share. Toll Brothers, Inc. (NYSE:TOL), PulteGroup, Inc. (NYSE:PHM) and DR Horton, Inc. (NYSE:DHI) were all up over 3% on the strong earnings from Lennar and pending home sales reaching a two year high.

Data sourced from: Company filings, and Yahoo!Finance. Chart from: Freestockcharts.com.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Tagged: , Residential Construction, Earnings
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