Bear of the Day: Lennar Corporation (LEN)

Lennar Corporation LEN is one of the largest U.S. homebuilders.

LEN stock has tanked roughly 45% from its September highs as its earnings estimates plummet amid a slowing housing market and persistent inflation across many critical aspects of its business.

What Investors Need to Know About Lennar

Lennar Corporation is a top U.S. homebuilder focused on what it calls affordable, move-up, and active adult homes. Its financial services segment offers mortgage financing, title, closing services, and more for Lennar homebuyers. On top of that, Lennar develops high-quality multifamily rental properties across the country.

The company is attempting to navigate challenges plaguing the entire homebuilding industry and housing market more broadly.

Lingering inflation took a toll on Lennar’s margins throughout fiscal 2024 and into Q1 FY25, which it reported on March 20.

Lennar closed Q1 fiscal 2025 with a gross margin on home sales of 18.7%, down 310 basis points (bps) YoY. The decline was mainly due to decreased revenue per square foot and increased land costs. Higher sales incentives and mortgage rate buydowns, which Lennar used to combat affordability challenges, also impacted margins.

The company’s fiscal 2025 consensus earnings estimate tanked 18% since its first quarter release, with its FY26 estimate 26% lower.

Lennar’s downward EPS revision trends extended a rough stretch that heated up after its Q4 FY24 release. “Our first quarter was marked by a challenging macroeconomic environment for homebuilding,” Co-CEO Stuart Miller said in prepared remarks.

“While demand remains strong, persistently higher interest rates and inflation, combined with a downturn in consumer confidence and a limited supply of affordable homes, made it increasingly difficult for consumers to access homeownership.”

Time to Stay Away from Lennar Stock?

Lennar’s negative earnings estimate revisions help it land a Zacks Rank #5 (Strong Sell). The stock is down roughly 45% from its highs, including a 25% YTD drop.

LEN’s rough performance pushed it below its 200-week moving average and to its most oversold RSI levels in the past decade.

Some investors might think about dipping their toes into Lennar at these levels. But it is a risky time to attempt to call a bottom on hard-hit Lennar stock until there are signs that the tides might start turning across the broader homebuilder market. 

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

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