RBC Mostly Positive On Lennar Ahead Of Earnings

In a report published Wednesday, RBC Capital Markets analyst Robert Wetenhall previewed Lennar Corporation's (NYSE: LEN) first quarter earnings report which will be reported Thursday morning.

Wetenhall estimated first quarter home building revenue of $1.33 billion (in-line with the consensus estimate) and earnings per share of $0.42 (versus consensus estimate of $0.45). The analyst also projected a 12 percent year-over-year rise in deliveries to 4,041 at an average selling price of $328,000 -- that marks a 3.5 percent increase from a year ago. New orders are projected to be 5,202 homes, marking a 16.5 percent year-over-year increase.

"Household formation has accelerated to levels last seen in 2005 (1.96 million year over year), building permits were strong in February (7.7 percent year over year), and employment indicators point toward a tighter labor market that should result in upward pressure on wages," Wetenhall wrote. "These factors and the potential benefit from lower energy prices collectively point toward sustained consumer demand for housing."

Wetenhall also noted the company's home building adjusted gross margin will decline by 160 basis points year-over-year to 23.5 percent (in-line with management's guidance) due to limited pricing power, unfavorable mix towards entry-level homes and the sale of homes in less profitable communities.

Shares are Outperform rated with a $57 price target.