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RBC Capital lowered its price target on Lennar (NYSE:LEN) to $98.00 from $122.00 on Wednesday, while maintaining a Sector Perform rating on the homebuilder’s stock. Currently trading at $105.12, with a P/E ratio of 8.32, InvestingPro analysis suggests the stock is undervalued despite recent market pressures.
The firm reduced its fiscal year 2025 earnings per share estimate by 10% to $8.48, citing gross margin pressure, increasing selling, general and administrative expenses, and weaker volumes and average selling prices.
RBC Capital noted that Lennar’s third-quarter guidance fell significantly below consensus expectations, with the company projecting earnings per share of $2.00-$2.20 compared to previous analyst consensus of $2.74.
The research firm explained that Lennar’s management continues to use pricing and incentives as levers to address affordability challenges, which requires "meaningful concessions from trade/supplier partners to stabilize GM%."
These factors, combined with higher SG&A expenses and soft volumes and average selling prices, are pushing earnings per share and return on equity lower, according to RBC Capital’s analysis.
In other recent news, Lennar Corporation reported its fiscal second-quarter 2025 earnings, revealing a slight miss on earnings per share (EPS) but exceeding revenue expectations. The company achieved a revenue of $8.38 billion, surpassing the anticipated $8.18 billion, but its EPS of $1.90 fell short of the forecasted $1.94. Following these results, UBS and Citi revised their price targets for Lennar, with UBS lowering it to $146 while maintaining a Buy rating, and Citi reducing it to $117 with a Neutral rating. Both firms cited higher selling, general, and administrative expenses and a cooling housing market as factors influencing their adjustments. Oppenheimer also maintained its Perform rating on Lennar, expressing concerns about the company’s technology investments and their impact on profit margins. Despite these challenges, Lennar’s management highlighted the company’s focus on technology integration and operational efficiency as part of its strategic initiatives. The company also reported maintaining a strong liquidity position with $5.4 billion, indicating a robust financial standing amid market uncertainties.
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