Lennar stock holds Market Perform rating at KBW on soft housing market

Keefe, Bruyette & Woods maintained its Market Perform rating and $128.00 price target on Lennar (NYSE:LEN) following the homebuilder’s second-quarter results.

The homebuilder reported earnings per share of $1.90, excluding certain items, which fell below both KBW and consensus expectations. The miss was attributed to lower average sales prices and higher selling, general and administrative expenses, partially offset by in-line gross margins and higher deliveries and financial services performance. Despite the earnings miss, InvestingPro analysis shows Lennar maintains strong financial health with a GOOD overall score, supported by robust cash flows and a solid balance sheet with more cash than debt.

New orders increased 6% year-over-year, falling short of KBW and consensus projections of 8-9% growth. The company’s management noted "ongoing softness in the housing market" in their commentary accompanying the results.

KBW estimates that Lennar’s guidance implies third-quarter earnings per share of $2.38, below the firm’s expectation of $2.98 and consensus of $2.74. The guidance also suggests fourth-quarter earnings per share of $2.85-3.10, compared to KBW’s estimate of $3.27 and consensus of $3.12.

The analyst’s maintained Market Perform rating reflects these mixed results and cautious outlook, keeping the price target unchanged at $128.00 despite the earnings shortfall and tempered forward guidance. The company maintains a strong market position with a gross profit margin of 21.85% and has demonstrated commitment to shareholder returns through consistent dividend payments for 48 consecutive years.

In other recent news, Lennar Corporation’s financial outlook has been revised to positive by Fitch Ratings, affirming its Long-Term Issuer Default Rating at ’BBB+’. This change highlights Lennar’s successful execution of its land-light strategy, maintaining low leverage, and strong cash flow. Despite some margin pressures, Fitch projects Lennar’s revenues to grow modestly in the coming years. Meanwhile, UBS analysts have maintained their Buy rating for Lennar, emphasizing the company’s community-based production strategy, which allows for flexibility in response to local demand. In contrast, JMP Securities adjusted their price target for Lennar to $150, maintaining a Market Outperform rating, suggesting confidence in the company’s financial model. Additionally, Keefe, Bruyette & Woods revised Lennar’s price target to $128, holding a Market Perform rating due to recent challenges in the housing market, such as affordability issues and increased incentives. At Lennar’s recent Annual Meeting of Stockholders, key votes were held, including the re-election of board members and approval of executive compensation, while some shareholder proposals did not pass. These developments reflect ongoing investor interest and varied analyst perspectives on Lennar’s strategic positioning and market conditions.

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