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Why Lennar Stock Jumped 18.9% in January

By Joe Tenebruso – Feb 8, 2020 at 2:39PM

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Executive Chairman Stuart Miller says the homebuilding giant is "hitting on all cylinders."

What happened

Shares of Lennar (LEN -0.47%) leapt nearly 19% last month, according to data provided by S&P Global Market Intelligence. The U.S. homebuilding titan delivered a strong fourth-quarter earnings report and announced a monster increase to its dividend.

So what 

Lennar's revenue grew 8% year over year to $7 billion. The gains were fueled by a 23% increase in new home orders and a 16% rise in deliveries. 

Better still, Lennar is becoming more profitable as it expands its revenue base. Its gross margin on home sales improved by 10 basis points, to 21.5%, while its operating margin increased 40 basis points, to 13.9%. This helped to drive an 11% rise in Lennar's adjusted net earnings to $674.3 million, or $2.13 per share. 

A person in a business suit sitting behind a table, with miniature houses on top of rising stacks of gold coins on top of the table

Image source: Getty Images.

Now what

Lennar's increasingly profitable homebuilding operations are also generating boatloads of cash. In fiscal 2019, Lennar produced $1.6 billion in homebuilding cash flow, which it used to pay down $1.1 billion in debt and repurchase nearly $500 million of its shares. 

"Our fourth quarter showcased our company hitting on all cylinders as our operations continued to improve cash flows and returns," Executive Chairman Stuart Miller said in a press release. 

This strong cash generation also allowed Lennar to boost its dividend by an enormous 213%, to $0.50 per share, on Jan. 9. 

"We are increasing our dividend as part of our overall strategy of focusing on total shareholder returns," Miller said. "Given our focus on operational excellence, land strategy and cash flow, we believe a diversified program of debt reduction, stock repurchase and now an increased dividend, is appropriate." 

Investors apparently like what they see from the homebuilder. Lennar's stock is already up another 4% so far in February, in addition to its strong gains in January.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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