Lennar Before Q3 Earnings: Should You Buy, Sell or Hold the Stock?

Lennar Corporation LEN is slated to report third-quarter fiscal 2025 results (ended Aug. 31) after the closing bell on Sept. 18.

In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 2.1% while the revenues topped the same by 1.6%. Notably, this Miami-based homebuilder surpassed earnings expectations in 23 of the trailing 26 quarters. The average earnings surprise in the trailing four quarters is illustrated in the chart below.

On a year-over-year basis, fiscal second-quarter earnings moved down 43.8% and revenues tumbled 4.4%.

How are Estimates Placed for LEN?

The Zacks Consensus Estimate for adjusted earnings per share (EPS) has moved downward to $2.12 from $2.14 in the past seven days. The estimated figure indicates a decline of 45.6% from earnings of $3.90 per share reported in the year-ago quarter.

The consensus mark for revenues is pegged at $9.04 billion, indicating a 4% decline from the year-ago figure of $9.42 billion.

For fiscal 2025, LEN is expected to register a 34.8% adjusted EPS decline on a 0.7% revenue decrease from a year ago.

Earnings Estimate Trend

Factors Likely to Shape Lennar’s Q3 Results

Revenues

The top line of Lennar in the fiscal third quarter is expected to have tumbled year over year because of the ongoing weakness in consumer confidence regarding home buying. Per Freddie Mac, the 30-year fixed mortgage rate ranged between 6.85% and 6.56% between June and August 2025. Although the mortgage rates have inched down within the said time frame, homebuyers are still struggling to adjust to the new benchmark amid economic and geopolitical uncertainties.

However, the company’s efforts in boosting home sales are expected to have fueled home deliveries during the quarter to be reported. But this positive trend is expected to have been more than offset by a lower average selling price (ASP) on homes delivered. For the fiscal third quarter, Lennar expects home deliveries between 22,000 and 23,000 units, with ASP on homes delivered between $380,000 and $385,000. These values compare with 21,516 homes sold in the year-ago quarter at an ASP of $422,000.

Our Zacks model expects home deliveries for the fiscal third quarter to be 22,730 units at an ASP of $382,790, indicating growth of 5.6% and a decline of 9.3%, respectively, year over year. Besides, our model predicts Homebuilding revenues (contributed 93.6% in the second quarter of fiscal 2025 revenues) to decline 3.4% year over year to $8.74 billion.

LEN is consistently executing strategies to counter the market uncertainties by driving housing starts, sales and closings to ensure long-term business efficiencies. Also, its efforts to incentivize sales to enable affordability are expected to have driven volumes further and fostered consumer confidence.

Margins

The company’s bottom line is expected to have weakened during the fiscal third quarter compared with a year ago because of its increased incentive offerings and lower ASP implemented to boost home sales. In a still-high mortgage rate scenario, Lennar chose the path of sacrificing its margins to boost home delivery numbers, which is likely to have been adverse in the near term.

For the fiscal third quarter, Lennar expects home sales gross margin to be approximately 18%, down from 22.5% reported a year ago. It also expects EPS in the range of $2.00-$2.20 for the quarter to be reported.

Moreover, ongoing investments in platforms like the “Lennar Machine,” Palantir-powered land systems and an ERP transition to JD Edwards are expected to have increased the selling, general and administrative (SG&A) expenses of the company in the quarter to be reported. Lennar expects SG&A expenses (as a percentage of home sales) to be in the range of 8-8.2%, up year over year from 6.7%.

Our model expects gross margin on home sales to be 18.2%, while SG&A expenses (as a percentage of home sales) are expected to be 8.1%.

Orders & Backlog

Boosted by its sales incentives and other in-house efforts, LEN laid out an expectation of new orders for the fiscal third quarter between 22,000 and 23,000, up from 20,587 reported a year ago. Our model predicts the same metric to be 22,588 units, reflecting 9.7% year-over-year growth.

We expect backlog units to be down 9.1% year over year to 15,396, with potential housing revenues down 16.7% to $6.45 billion.

What Our Model Unveils for LEN

Our proven model does not conclusively predict an earnings beat for Lennar this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: LEN has an Earnings ESP of -3.64%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lennar currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lennar Stock’s Price Performance & Valuation

LEN stock has gained 27.9% in the past three months, underperforming the Zacks Building Products - Home Builders industry, but outperforming the broader Zacks Construction sector and the S&P 500 index. During the said time frame, other homebuilding peers, including D.R. Horton, Inc. DHI, PulteGroup, Inc. PHM and KB Home KBH were hovering over Lennar. In the past three months, D.R. Horton, PulteGroup and KB Home have gained 43.6%, 36.6% and 28.9%, respectively.

LEN stock is trading at a premium compared with the industry and higher than its median, on a forward 12-month price-to-earnings (P/E) ratio basis. The overvaluation of the stock restricts a favorable entry point for the investors. A thorough evaluation of the fundamentals is recommended before taking any action.

Notably, D.R. Horton, PulteGroup and KB Home are currently trading at a forward 12-month P/E ratio of 14.3, 11.65 and 9.74, respectively.

Should Investors Consider LEN Stock Now?

This Miami-based homebuilder is facing pressure from elevated mortgage rates and lingering economic uncertainties, weighing on consumer confidence. While Lennar’s strategic incentives have supported home deliveries (which are expected to grow about 5.6% year over year), these gains are offset by a nearly 9% decline in average selling prices. Moreover, margin compression is also evident, with home sales gross margin expected to be down year over year, alongside higher SG&A expenses tied to technology investments and operational transitions.

Order activity remains a relative bright spot, with new orders forecast to climb nearly 10% year over year, though backlog is set to decline sharply, signaling revenue headwinds ahead. Importantly, Lennar’s consistent execution, focus on affordability and technology-driven efficiencies should bolster long-term positioning.

On the valuation front, trading at a premium forward P/E versus its peers, the stock appears overvalued in the near term. Thus, given margin pressures, muted earnings outlook and an unfavorable valuation relative to peers, investors may consider holding Lennar ahead of the upcoming fiscal third-quarter results, while awaiting improved visibility on affordability trends and housing demand stabilization.

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This article originally published on Zacks Investment Research (zacks.com).

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