Why Lennar may offer the most upside of all homebuilders

For over 60 years we’ve had the privilege of helping hundreds of thousands of families across America move into the next stage of their lives with a new Lennar home. And now, we’re honored to be considered one of the strongest homebuilding companies by Argus Research. In this recent 24/7 Wall St. article, Chris Lange explains how innovative product offerings in desirable locations across the country have help to position Lennar as one of the strongest companies among its peers.

Lennar Corp. (NYSE: LEN) received high praise from an independent research firm that believes that this homebuilder could rise to the top of its peer group, given recent trends. Argus is initiating coverage of Lennar with a Buy rating and a $59 price target.

Although sales of new homes are on track to grow for the fifth straight year in 2016, Argus believes that the market is still in the middle stages of its upcycle, given the severity of the preceding downturn. Additionally, the firm pointed out that mortgage rates remain buyer-friendly, and it does not expect the current cycle to peak until new home sales reach at least 700,000 units, well above the 502,000 new homes sold in 2015.

Specifically, over the past five years, as the U.S. housing market has recovered from recession, Lennar has posted compound annual revenue growth of 25.2%, net income growth of 35.1% and per-share earnings growth of 40.6%.

In 2016, Argus expects new home sales in the United States to rise for a fifth straight year, since bottoming at a very depressed 306,000 units in 2011, down from, 283,000 in 2005. While five years of improvement would be considered a lengthy upturn under typical circumstances, Argus expects the current recovery to continue for at least several more years, given the severity of the preceding downturn.

In the report, Argus detailed:

In addition to benefiting from the middle stages of an industry upcycle, Lennar, in our view, is one of the strongest companies in its peer group. We think the company is well established in many of the nation’s stronger geographic areas for housing, and also think it is very creative in its offerings. For example, it sells its homes under the “Everything’s Included” platform, where the company’s most popular upgrades and features are already included in the purchase price. In addition, it offers The Home Within a Home, which have attached apartments on the first floor with a separate private entrance, letting elderly parents or adult children live more independently in the home.

[Read the full article: Why Lennar May Offer the Most Upside of All Homebuilders]

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