Lennar (NYSE: LEN) faces hurdles, but these are near-term issues that obscure what investors should focus on. The company is a cash-flow machine, sustaining aggressive capital returns as it builds a better business. Key takeaways from the Q3 report and conference call include lower construction costs and faster turnover, which should improve profitability and accelerate growth as the market recovers. Until then, the Even-Flow strategy is working; the company is sustaining volume despite market deterioration with incentives, gaining share as smaller operators are priced out of business.
Lennar’s capital return is substantial. Even with the risk of slowing. As it stands, the dividend yields approximately 2.63% with shares trading near long-term lows, and buybacks are reducing the share count aggressively. Down about 7% on average at quarter’s end, reductions give investors significant leverage, offsetting the impact of buybacks on the balance sheet. Balance sheet highlights include reduced cash but a sufficient pile to sustain operational health and capital returns in upcoming quarters, steady total assets and reduced debt and liabilities. Equity contracted, but mildly, given the share count reduction and subsequent addition to treasury shares.
