Head to Head Contrast: PulteGroup (NYSE:PHM) versus Lennar (NYSE:LEN)

PulteGroup (NYSE:PHM) and Lennar (NYSE:LEN) are both large-cap construction companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, valuation and risk.

Analyst Recommendations

This is a breakdown of current ratings and price targets for PulteGroup and Lennar, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PulteGroup	0	5	9	1	2.73
Lennar	0	14	2	1	2.24

PulteGroup currently has a consensus price target of $136.46, suggesting a potential downside of 0.17%. Lennar has a consensus price target of $130.77, suggesting a potential downside of 4.90%. Given PulteGroup’s stronger consensus rating and higher possible upside, research analysts plainly believe PulteGroup is more favorable than Lennar.

Dividends

PulteGroup pays an annual dividend of $0.88 per share and has a dividend yield of 0.6%. Lennar pays an annual dividend of $2.00 per share and has a dividend yield of 1.5%. PulteGroup pays out 6.6% of its earnings in the form of a dividend. Lennar pays out 16.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. PulteGroup has raised its dividend for 7 consecutive years and Lennar has raised its dividend for 1 consecutive years.

Insider and Institutional Ownership

89.9% of PulteGroup shares are held by institutional investors. Comparatively, 81.1% of Lennar shares are held by institutional investors. 0.8% of PulteGroup shares are held by insiders. Comparatively, 10.0% of Lennar shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

PulteGroup has a beta of 1.26, meaning that its share price is 26% more volatile than the S&P 500. Comparatively, Lennar has a beta of 1.33, meaning that its share price is 33% more volatile than the S&P 500.

Earnings and Valuation

This table compares PulteGroup and Lennar”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PulteGroup	$17.69 billion	1.52	$3.08 billion	$13.38	10.22
Lennar	$35.37 billion	1.01	$3.93 billion	$12.09	11.37

Lennar has higher revenue and earnings than PulteGroup. PulteGroup is trading at a lower price-to-earnings ratio than Lennar, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares PulteGroup and Lennar’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PulteGroup	15.50%	21.01%	14.73%
Lennar	9.20%	12.73%	8.57%

Summary

PulteGroup beats Lennar on 11 of the 17 factors compared between the two stocks.

About PulteGroup

PulteGroup, Inc., through its subsidiaries, primarily engages in the homebuilding business in the United States. It acquires and develops land primarily for residential purposes; and constructs housing on such land. The company also offers various home designs, including single-family detached, townhomes, condominiums, and duplexes under the Centex, Pulte Homes, Del Webb, DiVosta Homes, John Wieland Homes and Neighborhoods, and American West brand names. In addition, the company arranges financing through the origination of mortgage loans primarily for homebuyers; sells the servicing rights for the originated loans; and provides title insurance policies, and examination and closing services to homebuyers. PulteGroup, Inc. was founded in 1950 and is headquartered in Atlanta, Georgia.

About Lennar

Lennar Corporation, together with its subsidiaries, operates as a homebuilder primarily under the Lennar brand in the United States. It operates through Homebuilding East, Homebuilding Central, Homebuilding Texas, Homebuilding West, Financial Services, Multifamily, and Lennar Other segments. The company’s homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development, and sale of residential land; and development, construction, and management of multifamily rental properties. It also offers residential mortgage financing, title, insurance, and closing services for home buyers and others, as well as originates and sells securitization commercial mortgage loans. In addition, the company is involved in the fund investment activity. It primarily serves first-time, move-up, active adult, and luxury homebuyers. Lennar Corporation was founded in 1954 and is based in Miami, Florida.