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Investing.com -- Lennar Corporation (NYSE:LEN) reported second quarter earnings that fell short of analyst expectations, while revenue surpassed estimates. The company’s gross margin outlook came roughly in line with estimates.
The homebuilder’s shares rose over 2% in premarket trading Tuesday after the release.
Lennar posted adjusted earnings per share of $1.90 for the quarter ended May 31, missing the analyst consensus of $1.94. Revenue came in at $8.38 billion, above the $8.18 billion estimate.
The company delivered 20,131 homes in Q2, up 2% YoY. However, the average sales price declined 9% to $389,000 compared to $426,000 in the same quarter last year, reflecting softer market conditions.
New orders increased 6% to 22,601 homes. For the third quarter, Lennar forecasts new orders of 22,000-23,000, below the Bloomberg consensus estimate of 23,674.
"While we continue to see softness in the housing market due to affordability challenges and a decline in consumer confidence, we adhered to our strategy of driving starts, sales, and closings in order to build long-term efficiencies in our business," said Stuart Miller, Executive Chairman and Co-CEO of Lennar.
Gross margin on home sales was 17.8%, or 18.0% excluding purchase accounting, down from 22.6% in Q2 2024. This compares to the Street consensus of 17.9%. The company expects gross margins to remain "approximately 18%" in Q3.
"The F3Q GM% guide of ’approximately 18%’ is largely in-line vs. our 18.1% and Street 18.1%," RBC Capital Markets analysts commented in post-release note.
"Our sense is the buy-side is around ~17.5% for F3Q, putting the result slightly better than feared though still relatively in-line with the buy-side’s ~flat q/q expectations," they added
"Some softness on volumes and average selling prices (ASPs) still points to downside risk to EPS, but the modestly better than feared GM% for 2Q and the 3Q guide could be enough for the stock here given the negative sentiment," RBC continued.
Separately, Evercore analysts said they expect investors’ focus on the earnings call to be on whether 18% serves as a near-term gross margin floor as Lennar manages sales pace and pricing, clarification on the SG&A miss, and updates on share repurchase plans.
Lennar repurchased 4.7 million shares for $517 million during the quarter. It ended Q2 with $5.4 billion in liquidity and a homebuilding debt to total capital ratio of 11.0%.