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Hurricanes Harvey and Irma to Delay Lennar’s Home Deliveries

Zacks

Miami, FL-based homebuilder Lennar Corporation LEN provided views regarding its fiscal third-quarter deliveries and new orders, post hurricanes, Harvey and Irma. The company said that the natural disaster is expected to cause delays in home deliveries. Lennar’s shares slipped 0.6% to $50.90 on Sep 14.

The company said that the hurricanes affected its communities in Texas, Florida, Georgia and South Carolina that represent 40% of Lennar’s annual homebuilding revenues.

The company said it had 7,610 new orders and 7,598 deliveries for the third quarter ended Aug 31. This represents an increase of 8% and 12%, respectively, year over year.

Hurricane Harvey impacted about 120 new orders and deliveries during the quarter, and is expected to impact about 130 deliveries in the fiscal fourth quarter. Lennar further added that Hurricane Irma could delay about 700 deliveries from the fourth quarter into fiscal 2018.

Lennar CEO Stuart Miller said, "Although we believe the storm damage to be mild, we are in the early stages of assessment" and will update investors on Oct 3 during the company's third-quarter call.”

Lennar Corporation Price

Lennar Corporation Price | Lennar Corporation Quote


Meanwhile, Atlanta-based homebuilder Beazer Homes USA, Inc. BZH recently reported that it also expects new home sales and closings to be lower in the quarter ending Sep 30 on a year-over-year basis due to the storm-related impacts.

Nonetheless, Lennar remains optimistic for fiscal 2018 and expects that the rebuilding effort will drive higher demand for new homes next year.

Lennar is one of the best positioned homebuilders to capitalize on the housing recovery driven by diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage.

Lennar’s total revenue grew 18.1% year over year in the first sixth months of fiscal 2017, thanks to the solid homebuilding revenue that increased 15.7%. These were primarily driven by a 14% increase in the number of home deliveries and a 2% rise in the average sales price of homes delivered. Lennar’s core homebuilding results remain consistent with the slow and steady housing recovery.

Although two back-to-back hurricanes have delayed Lennar's deliveries, we believe overall positive housing momentum is likely to help the company stay on solid ground in the future. This is reflected in the estimates revision trend.

Over the last 90 days, the Zacks Consensus Estimate for current quarter’s earnings has moved down 20.9%, reflecting seven downward revisions. However, the company’s current year’s as well as next year’s earnings estimates inched up 1.4% and 3%, respectively. Positive earnings estimate revision indicates analysts’ confidence in the stock and add to the optimism to this Zacks Rank #2 (Buy) company.

Other Key Picks

Other top-ranked stocks in the industry are NVR, Inc. NVR and M/I Homes, Inc. MHO. While NVR sports a Zacks Rank #1 (Strong Buy), M/I Homes and Meritage Homes carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVR’s earnings are expected to grow 33.9% in 2017, while that of M/I Homes by 37.1%.

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