Homebuilder KB Home jetted higher in early trade Thursday, following a late-Tuesday earnings report. Warren Buffett-backed S&P 500 component Lennar also advanced, after reporting better-than-expected second-quarter earnings and revenue late Monday, in a busy week for real estate and housing market observers.
Miami-based Lennar announced Monday that second-quarter earnings grew 15% to $3.45 per share while revenue totaled $8.8 billion, increasing 9% compared to a year ago. Analysts expected EPS of $3.23 and $8.48 billion in sales.
Meanwhile, Lennar saw new orders increase 19% to 21,293 homes and ended the quarter with a backlog of 17,873 homes, valued at $8.2 billion. The company delivered 19,690 homes in Q2, a 15% increase vs. Q2 2023. The average sales price of homes delivered was $426,000 in the second quarter, down 5% compared to a year ago.
Lennar said Monday that the decrease in the average sales price of homes was primarily due to an "increased use of incentives and product mix."
Analysts predicted Lennar would deliver 19,353 homes with an average price of $422,800, according to FactSet. In March, Lennar forecast Q2 EPS between $3.15-$3.25 with home deliveries coming in at 19,000-19,500. The company also forecast the average price per home delivered would be between $420,000-$425,000.
"We are pleased to report another strong quarter against the backdrop of evolving market conditions as interest rates rose for most of the quarter and then subsided as the quarter closed," Co-Chief Executive Stuart Miller said in the earnings release Monday.
Miller added that "affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment."
Looking ahead to the third quarter, Lennar predicts home deliveries between 20,500-21,000 with an average sales price of $420,000-$425,000.
S&P 500: Busy Week For Real Estate And Housing
Fellow homebuilder KB Home received a handful of modest price target hikes from analysts following its Q2 report late Tuesday.
KB reported earnings at $2.15 a share, up 11%. Revenue came in at $1.71 billion, a 3% decline. Deliveries dipped 4%, to 3,523 and the average selling price increased a fraction, to $483,000. Analysts had predicted a 7% decline in EPS with revenue for the homebuilder slipping 6% in the second quarter.
KB management tightened its projected revenue range for the year to between $6.7 billion and $6.9 billion, vs. earlier guidance of $6.5 billion to $6.9 billion. It lifted estimates for average selling prices to between $485,000 to $495,000, from $480,000 to $490,000.
Meanwhile, the National Association of Home Builders released its June survey on Wednesday. The index dropped to 43 for the month, down two points from May and to its lowest level since December.
On Thursday, the Commerce Department reported May housing starts fell 5.5%, below expectations and to their lowest mark since June 2020. Building permit activity declined 3.8%, accelerating the 2.9% dip from May.
Housing starts fell in April as mortgage rates crept higher. Econoday calls for a flat reading from the NAHB survey.
The National Association of Realtors (NAR) is set to release May existing-home sales on Friday. The key economic metric for homebuilders, new-home sales, is due to be reported on June 26.
U.S. Housing Market And Warren Buffett
The big picture in the U.S. is that of a long-term housing shortage. The construction of new homes has not kept pace with the growing population. Rising material costs, supply-chain issues and labor shortages since the Covid pandemic have exacerbated the issue.
The shortage is currently running at a deficit of about 5.5 million homes, according to the National Association of Realtors. The gap is so large it would take more than a decade to close, the NAR says, even if new-home construction accelerates.
In 2023, new-home prices remained strong and demand steady as high mortgage rates left owners of existing homes holding tight — not wanting to sell and move up into more expensive mortgages.
Warren Buffett purchased around $20 million worth of S&P 500 component Lennar in 2023, along with adding a D.R. Horton position, which he subsequently sold.
What's Inside Berkshire Hathaway's Portfolio?
S&P 500 Stock: Lennar Performance
Lennar stock gained less than 1% Thursday morning. KB Home shares jumped 5% in early trade. Both Lennar and KB Home stocks have pulled back recently. Lennar is testing lows from April. KB Home is rebounding from a test of support at its 10-week line.
LEN shares have fallen out of a flat base that had an official buy point of 172.59, according to MarketSurge analysis. The stock is currently about 10% below that entry, in a losing battle to hold support at its 10-week line.
On Jan. 9, Lennar hiked its annual dividend by 50 cents to $2 per share. The homebuilder also authorized an increase to its stock-repurchase program to $5 billion.
"Given the strength of our balance sheet, our strong cash position and our operating strategy driving cash flow, we are focusing more of our capital allocation on maximizing total shareholder returns," co-Chief Executive Stuart Miller said at the time.
The IBD-tracked Building-Residential/Commercial industry group surged 60% in 2023. This year, the 22 stocks in the group have collectively advanced 6.4%.
KB Home stock is rebounding from a pullback that followed its breakout from a cup-with-handle base with a 70.58 buy point in May. The stock has advanced around 14% in 2024.
Lennar stock has an 86 Composite Rating out of a best-possible 99. The S&P 500 stock has an 81 Relative Strength Rating. The EPS Rating for the S&P 500 component is 93.
Please follow Kit Norton on X @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Is Tesla Stock A Buy Or A Sell?
Get Full Access To IBD Stock Lists And Ratings
Learning How To Pick Great Stocks? Read Investor's Corner
Is Rivian A Buy Right Now After It Launched Its New Product Line?
Three Titans Vie For Crown In Split Market; Tesla Has A New Base
