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On Tuesday, Keefe, Bruyette & Woods adjusted its stance on Lennar Corporation (NYSE:LEN), downgrading the homebuilder’s stock from Outperform to Market Perform. The firm also revised its price target for the company’s shares, reducing it to $141 from the previous $152.
The decision to downgrade Lennar’s stock rating comes as analysts at Keefe, Bruyette & Woods observe the company’s valuation approaching parity with its large-cap peers. This change is noteworthy, especially considering Lennar’s recent completion of the MRP spin-off in February. Since that transaction, Lennar’s valuation has increased to 1.72 times, up from 1.4 times. This is in comparison to D.R. Horton’s (DHI’s) 1.74 times and PulteGroup’s (NYSE:PHM’s) 1.82 times, with the latter not being covered by the firm. Historically, Lennar has traded at a discount of 6-12% to its peers.
The downgrade reflects concerns over potential downside risks to Lennar’s estimates. Keefe, Bruyette & Woods points to the challenging macroeconomic environment and uncertainties surrounding the MRP spin-off as factors that could impact the company’s gross margin. Additionally, the analysts anticipate a choppy Spring selling season, which traditionally is a key period for homebuilders.
Despite the downgrade, Keefe, Bruyette & Woods remains positive about Lennar’s long-term positioning within the industry. However, the firm suggests a more cautious approach for the time being. They recommend waiting for a better entry point before taking a position in Lennar’s stock, indicating a watch-and-wait strategy for investors considering the current market dynamics.
In other recent news, Lennar Corporation has seen its stock price target reduced by Keefe, Bruyette & Woods from $170 to $152. Despite the adjustment, the firm maintained an Outperform rating, noting a lower expected gross margin and the effects of a land spin-off. Analysts revised earnings per share estimates for 2025-2026 downward, reflecting a reduced gross margin forecast. In the homebuilding sector, Seaport Research upgraded several companies, including Lennar, from neutral to buy, citing potential upside despite current fundamental challenges. Additionally, the sector experienced a downturn following President Trump’s imposition of a 25% tariff on Canadian lumber imports, which could increase costs for homebuilders like Lennar.
Meanwhile, J.P. Morgan Chase Commercial Mortgage Securities Trust and JPMBB Commercial Mortgage Securities Trust both announced changes in their special servicers. Rialto Capital Advisors, LLC has been appointed as the new special servicer for both trusts, replacing Midland Loan Services. This change is part of regular operations and is not expected to impact the performance of the mortgage pools. These developments reflect ongoing adjustments and strategic shifts within the housing and mortgage markets.
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