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Investing.com -- S&P Global Ratings revised its outlook on Lennar Corp (NYSE:LEN). to positive from stable on Thursday, citing the homebuilder’s strong credit metrics and substantial cash reserves.
The rating agency affirmed Lennar’s ratings while noting the company is expected to maintain debt to EBITDA below 1x over the next 12-24 months. As of May 31, 2025, Lennar’s debt to EBITDA stood at 0.7x with balance sheet cash of $1.4 billion.
S&P projects Lennar will fully utilize its recently issued $1.6 billion delayed draw term loan over the next 24 months. Despite this, the company’s balance sheet cash is expected to reach about $5 billion by the end of fiscal 2025, resulting in year-end debt to EBITDA of approximately 0.4x.
The rating agency expects higher input costs and incentives to continue constraining margins, with EBITDA margins stabilizing in the 10%-11.5% range through fiscal 2026. Lennar’s EBITDA margins have declined to about 9.6% in May 2025 from approximately 17.1% in May 2023.
S&P forecasts Lennar’s 2025 consolidated revenue to decline about 4% to approximately $34 billion, with 2025 EBITDA falling about 35% to around $3.5 billion. Net debt is expected to increase to about $1.5 billion in 2025 from approximately $252 million in 2024.
The homebuilder’s gross margins have deteriorated from their peak during the pandemic, declining to 17.8% in the most recent quarter. S&P believes margins will remain around 18% through the end of 2025.
In February 2025, Lennar completed the taxable spin-off of Millrose Properties Inc., distributing approximately 80% of Millrose’s stock to its stockholders. Following this transaction, Lennar now controls 98% of its total homesites through options, reducing land duration risk.
S&P could raise Lennar’s rating over the next 12-24 months if gross margins expand and remain above 20% through housing cycles, operating performance improves with revenue and EBITDA growth, and the company maintains strong credit measures including debt to EBITDA below 1x.
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