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Should You Buy Lennar? Homebuilder Analyst Insights

Lennar announced on Thursday that orders for new homes increased for the first time in more than three years, as homebuyers took advantage of lower prices and a federal tax credit. The company also posted a quarterly profit.

What does this mean for Lennar and the industry? James McCanless, senior homebuilding analyst at FTN Equity Capital Markets, shared his analysis.

Lennar's report “was much better than we expected,” McCanless told CNBC. “They are in the right areas and poised for growth.”

McCanless said Lennar is reducing the amount of discounts offered per home, and expanding into areas where there is larger new demand for housing.

Even though approximately 40 to 50 percent of Lennar’s deals were fueled by the government incentive for first-time buyers, McCanless said the firm's growth should be sustainable.

“The tax credit runs forward and we’re assuming the employment growth should continue the gains on through the rest of 2010,” he said.

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More Market Analysis:

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CNBC.com Slideshow:

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CNBC Data Pages:

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Lennar's Competitors:

D.R. Horton

KB Home

Pulte Homes

Toll Bros.

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Disclosures:

McCanless does not own shares of Lennar.

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Disclaimer