Lennar Reports Robust Revenue Growth
Lennar Is Hovering Near the Top – Should I Invest? (Part 9 of 20)
Robust revenue growth
Lennar Corporation (LEN) has been performing consistently well with the onset of the economic revival. Its revenue grew at a CAGR (compounded annual growth rate) of 26.1% over the past five years, jumping from $3.07 billion in 2010 to $7.8 billion in 2014. The company has been trying to diversify its revenue base by entering into related businesses such as Lennar Multifamily, Lennar Commercial, and Sunstreet.
Homebuilding lifts revenue
Lennar’s homebuilding segment continues to dominate the company’s total revenue stream. The segment’s share increased from 88% in 2010 to 90.3% in 2014. Lennar’s homebuilding revenue reported a higher CAGR of 26.9% during the same period.
Historically, Lennar (LEN) has a strong presence in the Homebuilding East and Homebuilding West regions. Their respective contributions to the total homebuilding revenue were 32% and 25.6% in 2014.
Revenues were higher primarily due to a 17.7% CAGR growth in the number of homes delivered during the past five years, from 10,955 in 2010 to 21,003 in 2014. The company’s revenues also got a boost from the 7.3% increase in the average sales price, which rose from $246,000 to $326,000. This increase indicates that pricing power is returning to the homebuilders.
Lennar Financial – slow and steady
Lennar’s financial services segment benefited from the expansion of the homebuilding segment. It grew organically as well as through the acquisition of a mortgage company. Lennar Financial, which contributed 5.8% to the total revenue in 2014, grew at a modest CAGR of 13.3% during the past five years to $454 million in 2014. Revenue was primarily driven by the company originating higher residential mortgage loans totaling $6 billion in 2014, compared to $4.4 billion in 2012.
Rialto and Lennar Multifamily
Lennar’s Rialto segment, which contributed 3% to the total revenue in 2014, grew at a higher CAGR of 25.6% during the past five years, to $230.5 million. Lennar Multifamily started contributing in 2012 and remains Lennar’s smallest segment.
How does Lennar compare to its peers?
At 31.1%, Lennar has reported higher revenue growth than most of its peers. Toll Brothers (TOL) was an exception with a growth of 46.3%.
Another major player, PulteGroup (PHM), reported the lowest growth of 2.51%. D.R. Horton (DHI) had a revenue growth of 28.2%.
ETFs such as the SPDR S&P Homebuilders ETF (XHB) and the iShares Dow Jones U.S. Home Construction Index Fund (ITB) actively look at companies’ revenue growth in order to take exposure to the stocks.
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