UPDATE: Credit Suisse Starts Lennar (LEN) at Neutral
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Credit Suisse analyst Daniel Oppenheim initiates coverage on Lennar (NYSE: LEN) with a Neutral rating and a price target of $88.00.
The analyst comments "Market Share Driving Efficiency and Profitability: Lennar’s position as the second largest builder in the U.S. based on volume (following only D.R. Horton) and with 60,000 deliveries in 2021 enable the company to utilize its scale to generate greater SG&A efficiencies. While LEN’s SG&A represents just 7.1% of 2021 revenue and is below the 9% average for the sector, we see room for LEN to keep this below 7% in 2022 and 2023. Achieving further efficiency would represent upside in our model, with every 10 basis points equating to $0.08 of EPS. Cash Flow Generation Through Land-Light Model: LEN continues to focus on its investment in land to optimize cash flow generation from its homebuilding operations. Of its more than 440,000 controlled lots, LEN owned 41% of these, with the remaining lots controlled via options. This has been a significant focus in recent years with its owned lots declining as a percentage of lots controlled from 79% at the end of fiscal 2017. We believe that LEN will continue to emphasize options in order to minimize the capital in land and to generate stronger cash flow."
Shares of Lennar closed at $82.31 yesterday.
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