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Investing.com - Keefe, Bruyette & Woods lowered its price target on Lennar (NYSE:LEN) to $114.00 from $128.00 on Friday, while maintaining a Market Perform rating on the homebuilder’s stock.
The research firm reduced its 2025-2026 earnings per share estimates by 17% based on lower projected gross margins of 17.7-18.0%, compared to previous estimates of 18.5%. KBW also cited higher selling, general and administrative expenses of 8.0-8.5%, up from earlier projections of 7.7%. InvestingPro analysis shows the company maintains strong financial health with more cash than debt on its balance sheet.
KBW expects Lennar to face "ongoing margin headwinds" due to expensing of MRP land costs and increased SG&A spending. The firm also reduced its home sale revenue forecast by 4.8% for the period.
The new price target of $114 represents approximately 1.57 times current tangible book value and 1.52 times one-year forward tangible book value, according to the research note.
KBW noted that while Lennar benefits from operating scale and low financial leverage, the current housing market remains "challenged by stretched affordability, declining consumer confidence, and increased supply in key areas." The firm indicated it prefers D.R. Horton and Toll Brothers (NYSE:TOL) among homebuilders, both also rated Market Perform.
In other recent news, Lennar has reported its fiscal second-quarter 2025 earnings, which have prompted several analyst firms to adjust their price targets for the homebuilder. The company reported normalized earnings per share of $1.90, which met some expectations but fell short of the consensus estimate of $1.94. This performance has led to a series of price target reductions by various analysts. Citizens lowered its price target to $130, citing weak guidance on gross margins and higher selling, general, and administrative (SG&A) expenses. Similarly, BofA Securities reduced its target to $105, highlighting higher SG&A expenses and lower deliveries as contributing factors. RBC Capital also cut its price target to $98, noting pressure on gross margins and weaker volumes. UBS adjusted its target to $146, pointing to lower pricing due to incentives and increased SG&A expenses. Lastly, Citi reduced its price target slightly to $117, reflecting a slowdown in the housing market and higher SG&A expenses. These adjustments reflect the challenges Lennar faces in the current housing market environment.
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