Lennar (NYSE:LEN) Should Outperform Peers says Ticonderoga

The current quarter of Lennar (NYSE:LEN) should be very similar to the prior one, although margins could be pressured slowing demand and incentives used to offset that.

Ticonderoga said, "We expect this quarter will be similar to the last, as the primary focus for investors will be centered around mediocre demand trends, growing incentives and the pressures those issues will exert on LEN’s margins. We feel comfortable earnings will be there, as expectations are rational. On the Rialto front, this rapidly growing story should only help profits."

"Our EPS estimate is $0.10, ahead of the Street Consensus of $0.02, however, there are several estimates above ours, so expectations are meaningful and growing. Impairment charges (not in our estimates) could range from $25M to $50M. We worry that given the strong run the equity has had, any miss on key metrics could weigh on the equity. Despite those worries, we believe LEN has set itself on an enviable course that should continue delivering results which are better than peers.’

"We expect unit Orders of 2,265, down 14% YoY and 13% sequentially. Consensus is just slightly above our estimate...We expect Orders ASP to decline 5.7% due to higher incentives and adverse mix...Revenues should be down 29% to $648M. This is well below consensus of $756M, as we are forecasting LEN’s Backlog Conversion Rate to decline slightly from abnormally high levels."

Ticonderoga maintains a 'Buy' on Lennar, which closed Monday at $19.05, up $0.30, or 1.60 percent. Ticonderoga raised their price target on them to $21.