This Analyst Is Using Lennar To Bet On A Housing Recovery

• Lennar Corporation (NYSE: LEN) on Monday reported a stronger-than-expected third quarter print in which the company earned $0.96, exceeding the consensus estimate of $0.81.
• Patrick Kealey, Jr. of FBR maintained an Outperform rating on the stock with a price target raised to $60 from a previous $59.
• Kealey noted Lennar is "one of the best positioned builders" in the sector when it comes to capitalizing on the housing recovery.

Lennar's homebuilding revenue improved 22 percent versus the prior year and average selling prices for the quarter grew 5 percent to $350,000.

In a report published Tuesday, Patrick Kealey, Jr. of FBR & Co commented that Lennar reported a "good" quarter with closings, gross margins, and earnings all exceeding his expectations. The analyst added that the company continues to see "strong" pricing power on its new products which will continue benefiting the company heading into 2016.

"We think Lennar remains one of the best-positioned builders in the homebuilding sector when it comes to capitalizing on the housing recovery, and we continue to view it as one of the stronger growth stories in the space," Kealey wrote.

Kealy said the quarter also demonstrated Lennar's "ability to adapt" its business model as it continues to "pivot" towards a shorter-duration asset model, while also driving efficiencies through its homebuilding platform.

Moreover, the company is expecting its multifamily segment to become profitable in the fourth quarter, which will help the company realize "strong" returns for shareholders given the "elevated" demand for multifamily units.

Finally, Kealey stated that Lennar has "multiple levers" to generate earnings improvement in the current economic environment (land, labor, and mortgage availability will continue limiting the housing recovery to a steady pace) through its various operating segments. As such, the analyst is "confident" in management's ability to capitalize on the overall growing housing demand.

Shares were maintained at Outperform with a price target raised to $60 from a previous $59.