It's been a pretty great week for Lennar Corporation (NYSE:LEN) shareholders, with its shares surging 11% to US$80.84 in the week since its latest full-year results. The result was positive overall - although revenues of US$22b were in line with what the analysts predicted, Lennar surprised by delivering a statutory profit of US$7.85 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Lennar's twelve analysts is for revenues of US$25.4b in 2021, which would reflect a solid 13% increase on its sales over the past 12 months. Statutory earnings per share are predicted to climb 20% to US$9.54. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$24.6b and earnings per share (EPS) of US$8.29 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a nice increase in earnings per share in particular.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$93.20, suggesting that the forecast performance does not have a long term impact on the company's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Lennar at US$112 per share, while the most bearish prices it at US$77.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Lennar's revenue growth is expected to slow, with forecast 13% increase next year well below the historical 20%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.5% next year. Even after the forecast slowdown in growth, it seems obvious that Lennar is also expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Lennar's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Lennar. Long-term earnings power is much more important than next year's profits. We have forecasts for Lennar going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Lennar you should be aware of.
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