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tdp2664 InvestorPlace On Monday, homebuilder Lennar Corp. (NYSE: LEN ) reports earnings for the quarter ending Aug. 31, 2011. The stock market correction in July has created strong upside potential on the stock, assuming earnings can meet or beat expectations. There have been so many false starts to the supposed recovery in homebuilding that I have lost count. This year was supposed to be the year, but so far 2011 looks like another dud for the sector. Previously, shares of homebuilding stocks rallied on any hint that a bottom was near for the much-beleaguered sector. That enthusiasm had pushed homebuilding stocks to premium valuations early in the year. Recent selling has made the group attractive today. On an operating basis, Lennar has been doing well over the past year, including a three-cent-per-share earnings beat for the quarter ending May 31, 2011. The company has exceeded analyst expectations in each of the past four quarters: When the company reported results for its last quarter, ending May 31, 2011, shares gained more than 2%. Those gains have now evaporated and the stock trades substantially below levels reached before that report was released. For the current quarter, the average Wall Street estimate is for the company to post a profit of 10 cents per share. Ninety days ago, the estimate stood at 14 cents per share. For the full year ending Nov. 30, 2011, Wall Street expects the company to make a profit of 52 cents per share. That number jumps 73% to 90 cents per share. At current prices, Lennar trades for 26.5 times current fiscal-year estimated earnings and 0.98 times book value. Historically, buying shares of homebuilder stocks trading below book value has been a profitable move. You can see the decimation in share value over the past year: With the froth from early 2011 enthusiasm for a sector rebound now gone, investors should look at Lennar a bit more rationally. While high unemployment and still significant numbers of foreclosed and short-sale homes on the market are legitimate concerns, it does indeed appear that a bottom is near for housing. Mortgage rates are at historical lows ,
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