Bear of the Day: Lennar Corporation (LEN)

Lennar Corporation LEN stock has dropped around 7% since its latest disappointing earnings release on September 18.

The recent negative earnings revisions, which landed the U.S. homebuilding giant a Zacks Rank #5 (Strong Sell), extend a prolonged downward trend as Lennar struggles to navigate the slowing housing market and higher mortgages, and persistent inflation.

Time for Investors to Stay Away from Lennar Stock?

Lennar is a U.S. homebuilder powerhouse that’s been in business since the 1950s. The firm specializes in what it calls affordable, move-up, and active adult homes. LEN also develops multifamily rental properties across the country.

On top of that, Lennar offers financial services such as mortgage financing, title, closing services, and more for Lennar homebuyers. The homebuilder went on a massive run of revenue growth between 2012 and 2022, capped off by back-to-back years of over 20% sales growth in FY21 and FY22.

Lennar and the entire housing and homebuilder industry have suffered greatly since then. Mortgage rates surged off their lows, while housing prices and inflation have soared, drying up the housing market. LEN missed of our Q3 earnings estimate on September 18 and offered downbeat guidance.

The company’s “gross margins on home sales were $1.4 billion, or 17.5% in Q3, down from 22.5% in the year-ago period. Lennar’s consensus earnings estimates have dropped around 8.5% for 2025 and 2026 over the last two months, extending its downward trend and earning LEN its Zacks Rank #5 (Strong Sell).

Overall, LEN’s consensus earnings estimate for 2025 has tanked 49% over the past year from $16.04 to its current $8.25, while its 2026 estimate tumbled 47% from $16.81 to $9.01.

Lennar’s business will bounce back eventually since the U.S. housing market is in desperate need of more inventory. But it is difficult to say when the housing market will rebound even as the Fed cuts interest rates.

The average 30-year fixed rate mortgage in the U.S. hovers at around 6.17%, which is down from its 2023 highs of 7.8% and near 12-month lows. Still, mortgage rates sit roughly where they were in September 2024.

LEN stock is trying to hold its ground near its long-term 50-week and 200-week moving averages, which are converging. In fact, the chart above shows that Lennar is at risk of seeing its longer-term 200-week cross above its 50-week, which is a bearish sign for technical traders.  

It’s likely best for investors to simply keep an eye on Lennar for now and wait for signs of a broader housing market turnaround before they consider buying the beaten-down stock or other homebuilders. 

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

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