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On Tuesday, BTIG analysts maintained a Neutral rating on Lennar Corporation (NYSE:LEN) while adjusting their earnings forecast for the company. The homebuilder, currently trading at an attractive P/E ratio of 7.74 and showing strong financial health according to InvestingPro metrics, reported first-quarter earnings for 2025 at $1.96 per share, surpassing BTIG’s estimate of $1.80 and the consensus estimate of $1.71. The outperformance was attributed to several factors including higher deliveries, reduced selling, general and administrative expenses relative to sales, increased financial services and other income, a lower tax rate, and fewer shares outstanding - with management actively pursuing share buybacks as noted in InvestingPro’s analysis. However, these positive factors were partially offset by a lower average selling price, reduced gross margin, and a mark-to-market loss on the company’s investment portfolio. With trailing twelve-month revenue of $35.4 billion and a gross profit margin of 22.5%, Lennar maintains its position as a prominent player in the household durables industry.
Lennar’s unit orders saw a year-over-year increase of 1%, which was contrary to BTIG’s expectation of a 2% decline. The guidance for second-quarter order and delivery volumes was more positive than anticipated. Nevertheless, the outlook for pricing and margins was notably less favorable. Management’s comments indicated a sluggish start to the Spring selling season, with declining consumer confidence and affordability issues necessitating aggressive sales incentives to sustain volume.
The spin-off of Lennar’s land assets into Millrose Properties (MRP, Not Rated) is expected to facilitate quicker asset turnover. However, BTIG forecasts a gross margin below 18% for the year, which could hinder improvements in returns for fiscal year 2025. Consequently, BTIG has revised its earnings per share estimate for Lennar downward to $9.50 from the previous $12.35 for FY25, and to $11.60 from $15.05 for FY26.
Despite these adjustments, BTIG analysts continue to rate Lennar stock as Neutral. They believe that the shares are unlikely to experience a re-rating based on its lighter asset base until there is a clear uptrend in margin and return trajectories. According to InvestingPro’s comprehensive analysis, which includes 14 additional key insights and a detailed Pro Research Report available to subscribers, Lennar’s current market position suggests potential upside from current levels based on their proprietary Fair Value model.
In other recent news, Lennar Corporation reported first-quarter 2025 earnings per share (EPS) of $2.14, surpassing the forecast of $1.75, and revenue of $7.6 billion, exceeding expectations of $7.42 billion. Despite these strong results, the company provided a second-quarter gross margin forecast that disappointed investors, leading to a reduction in price targets by several analysts. RBC Capital Markets revised its price target for Lennar to $122, citing weaker-than-expected demand and profit margins, while Citi adjusted its target to $127, acknowledging challenges such as increased interest rates and elevated inventory levels. Evercore ISI also downgraded Lennar’s stock rating from Outperform to In Line, lowering the price target to $131, following the company’s earnings report.
Lennar’s management has highlighted ongoing challenges, including buyer uncertainty and higher consumer debt, particularly in markets like Florida and Texas. To address these issues, the company is employing strategies such as incentives to bolster volumes and reduce costs. Notably, Lennar reported a decrease in direct construction costs and emphasized its asset-light strategy, with optioned lots now making up a significant portion of its controlled homesites. Analysts from Citi and RBC Capital have revised their earnings per share estimates for Lennar for fiscal years 2025 to 2027, reflecting anticipated weaker demand and gross margins. Additionally, Lennar completed the spin-off of Millrose and repurchased $703 million worth of its stock during the quarter, which was significantly higher than anticipated.
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