U.S. futures subdued as government shutdown stretches into second week
On Monday, RBC Capital Markets adjusted its outlook on Lennar Corporation (NYSE:LEN), a leading home construction company. Analysts at the firm have reduced the price target for Lennar stock to $122 from the previous $125 while maintaining a Sector Perform rating. The revision follows Lennar’s guidance for the second quarter, which suggested weaker than expected demand and profit margins. According to InvestingPro data, Lennar’s stock has declined over 31% in the past six months, currently trading at $116.57, though analysis suggests the stock may be undervalued at current levels.
Lennar’s management has indicated that the company plans to meet market challenges by adjusting prices to support orders, even though this strategy may reduce gross margin percentages. The second quarter guidance provided by the company reflects a continuation of substantial incentives, which RBC Capital analysts believe will persist against a challenging economic background. Despite these challenges, InvestingPro analysis shows Lennar maintains strong financial health with a "GREAT" overall score, supported by robust cash flows and a solid balance sheet with more cash than debt.
The analysts have also revised their forecast for Lennar’s fiscal year 2025 earnings per share (EPS), decreasing it by 17% to $9.43. This adjustment is based on the recent guidance and the current market conditions that Lennar is facing. The new price target of $122 is primarily driven by these lowered earnings estimates.
RBC Capital suggests that in the near term, there could be further downward pressure on Lennar’s stock price. The firm’s outlook is cautious, recognizing the current headwinds in the housing market and the impact they are having on Lennar’s business strategy and financial projections. Lennar’s focus on price adjustments and incentives is an effort to navigate the softer demand and maintain order flow, but it comes at the cost of profit margins.
In other recent news, Lennar Corporation reported its first-quarter 2025 financial results, showcasing an impressive earnings per share (EPS) of $2.14, which exceeded analyst expectations of $1.75. The company also surpassed revenue forecasts, posting $7.6 billion against the projected $7.42 billion. Despite these strong financial results, Lennar faced challenges, including a reduction in its gross margin forecast for the second quarter, which led Citi analyst Anthony Pettinari to lower the stock price target to $127 from $145.07. The company acknowledged difficulties such as increased interest rates and elevated inventory levels in Florida and Texas, but maintained its full-year volume guidance.
Evercore ISI also adjusted its stance on Lennar, downgrading the stock from Outperform to In Line and lowering the price target to $131 from $159. This followed Lennar’s first-quarter earnings report, which showed an adjusted diluted EPS of $2.16, surpassing both Evercore ISI’s and the Street’s projections. The company managed to outperform expectations in several areas, including financial services income and the number of closings. However, gross margins and average selling prices fell short of estimates.
Lennar continues to focus on cost reduction and maintaining a high volume of home deliveries. The company reported a decrease in direct construction costs and expanded its community count. Furthermore, Lennar successfully completed the spin-off of Millrose and repurchased approximately $703 million of its stock during the quarter, significantly higher than anticipated. These developments highlight Lennar’s strategic efforts to navigate the current market conditions while maintaining operational efficiency.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.