Lennar Corp. (NYSE: LEN): The home building firm reported second-quarter results this morning before the open that beat analyst estimates on both the top and bottom lines. Shares rose pre-market by 3.46% in response to the strong report. The housing recovery boosted both volume and prices for LEN despite investors' recent worries concerning rising interest rates. A double-digit growth in home building revenues and solid margins helped boost the company's earnings growth for this quarter.
Adjusted Actual $0.43 vs. Expected $0.33
Grew 104.7 % year-over-year
Actual $1.43 B vs. Expected $1.33 B
Grew 53.0% year-over-year
EPS Q1 2014: Actual $0.52 vs. Expected $0.51 (-1.93%)
Earnings per share in the current fiscal year: Actual $1.67 vs. $1.67 (Unchanged)
Key Takeaways from Conference Call
CEO Stuart Miller: “During the second quarter, our gross margin percentage on home sales improved to 24.1%, while our S, G&A % of home sales came in under 11% for the first time since our third quarter of 2006. Our operating leverage should continue to improve, driven by our higher new orders . During the quarter, our El Toro joint venture, which is managed by FivePoint Communities, contributed $13.0 million of earnings to our bottom line. Meanwhile, our financial services business generated $29.2 million of earnings during the quarter, as the refinance business continued its strong performance.”
Taking a Look at the Chart
Pattern: Breaking multi-year uptrend
The Homebuilders had been one of the leading sectors in the market over the past two years, and Lennar (LEN) played an instrumental role in that. However, since hitting a 52-week high of $43.79 back on May 24, the stock has been in a steady downtrend as the Homebuilders have done a 180 and become one of the weakest sectors in the market during this correction. LEN shares jumped 3.46% pre-market, but have given back all of those gains during the session.
LEN broke its multi-year uptrend during the pull-back over the last few weeks. Today's gap up gave bulls some hope that it could retest the broken trendline, but the fact that LEN couldn't hold pre-market gains is a troubling sign for the sector. Based on the recent technical action, the Homebuilders could continue to underperform the market for the foreseeable future.
Potential Sympathy Trades – Stocks in the Same Sector
Taylor Morrison Home Corp. (NYSE:TMHC)
KB Home (NYSE:KBH)
Comstock Holding Companies, Inc. (NASDAQ:CHCI)
Standard Pacific Corp. (NYSE:SPF)