On the fundamental side, LEN is one of the nation’s largest homebuilders. Today they reported results for their third quarter ended August 31, 2012. Third quarter net earnings attributable to Lennar in 2012 were $87.1 million, or $0.40 per diluted share, compared to third quarter net earnings attributable to Lennar of $20.7 million, or $0.11per diluted share, in 2011.
Key metrics to look at include the following…
-Gross Margin expanded 210 bps to 23.2%
-Operating margin improved 440 bps to 11.2%.
-New orders of 4,198 homes – up 44%; cancellation rate of 17%.
-Backlog of 4,513 homes – up 79%;
– And finally Backlog dollar value of $1.3 billion – up 95%
While all these metrics and figures sound just chummy, what explains the price action? Here we could turn to the options market. The $38 straddle was $3.47 as of the close on 09/21/12 or just under 10% of the stock. This is however using the October options, which still have a lot of time value in them; so that is not the best indicator for an event or implied move.
The next way to possibly explain the price action would be to turn to the analyst community. Here, the street is rather neutral to bearish on the name. The average price target is $33.69 and most have hold rating. It is interesting to look at the short interest too. The bears account for 20% of the float, meaning 20% of the float is short. This has however been trending down, short covering, since July 15, 2012 as the short interest has fallen 7.1% as some bears concede defeat.
Perhaps with the massive 91% gain YTD LEN needs to take a rest and settle down into its moving averages.
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