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Can Lennar build on strong Q2 earnings?

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Asset Watch

Can Lennar build on strong Q2 earnings?

 

Thursday, June 23, 2022

Lennar – the second-largest homebuilder in the US – outperformed analysts’ Q2 estimates on both the top and bottom lines on Jun. 21. “Our home deliveries were 16,549 and above the high end of our guidance given at the beginning of the quarter.” Says their Executive Chairman Stuart Miller.
After noting that higher interest rates “began to drive buyers in many markets to pause and reconsider,” he reassured investors that “we ended the quarter with $1.3 billion in cash, no borrowings on our $2.6 billion revolver and homebuilding debt to capital of 17.7%. Our balance sheet has never been in a stronger position than it is today.”
Investors’ anxiety has increased due to several factors like inflation, the Fed’s rate hike cycle and recession fears. So could Lennar benefit from oversold conditions?

When Lennar’s daily RSI drops below 30, short-term rallies tend to follow. That said, at the end of the Jun. 21 session, Lennar finished at $65.65, which is near support from the May and June 2020 highs and the early February 2020 lows.

A backtest of the breakdown below $70.71 could materialise if sentiment shifts in Lennar’s favour. For context, the level coincides with the May 2022 lows, the January 2021 lows, the October, November and December 2020 lows, and the February 2020 highs. While it’s a key level of resistance, it also represents a 7.7% upside from the Jun. 21 close.

So will Lennar build on the momentum of Q2, or is its foundation on shaky ground?


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