Lennar to Post Q2 Earnings: What's in Store for the Stock?

Lennar Corporation LEN is slated to report second-quarter fiscal 2025 results (ended May 31) after the closing bell on June 16.

In the last reported quarter, the company’s earnings and total revenues missed the Zacks Consensus Estimate by 23% and 1.6%, respectively. Notably, this Miami-based homebuilder surpassed earnings expectations in three of the trailing four quarters and missed on the other occasion, with the average surprise being 8.3%.

How Are Estimates Placed for Lennar Stock?

The Zacks Consensus Estimate for LEN’s earnings per share (EPS) has declined to $1.97 from $1.98 over the past seven days. The estimated figure indicates a decrease of 41.7% from the year-ago profit level of $3.38 per share. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)

Lennar Corporation Price and EPS Surprise

Lennar Corporation price-eps-surprise | Lennar Corporation Quote

The consensus estimate for revenues is pegged at $8.3 billion, indicating a 5.3% decrease from the year-earlier level.

Factors That are Likely to Influence Lennar’s Quarterly Results

Lennar’s second-quarter fiscal 2025 is expected to have been challenging due to persistent housing market pressures, including high mortgage rates and rising homebuilding costs, which continue to strain affordability and buyer demand. These factors are likely to have weighed on financial performance, with revenues, margins and EPS expected to decline.

To counter the affordability issues, Lennar has focused on dynamic pricing, digital marketing, with increased incentives and mortgage rate buydowns to support its prospects. However, the current uncertainties surrounding the housing market are expected to have overshadowed its efforts to target a solid top-line performance.
    
LEN expects home deliveries during the quarter between 19,500 units and 20,500 units compared with 19,690 units delivered in the year-ago period. However, delivery ASP is expected to be between $390,000 and $400,000, down from $426,000 reported a year ago. Our model predicts home deliveries to be up 2.1% to 20,110 units, with the ASP of the delivered units declining 8% to $391,920.

For the fiscal quarter, we expect home sales to decline 5.7% year over year to $7.88 billion. Homebuilding revenues are expected to be $7.91 billion, down from $8.38 billion a year ago.

LEN’s New Orders & Backlog

Lennar expects new orders to be in the range of 22,500-23,500 units, up from 21,293 units reported a year ago. Our estimate for new orders is currently pegged at 22,862 units, indicating a 7.4% increase from a year ago. 

Our model predicts a backlog (units and values) of 15,898 homes or $7.21 billion compared with the year-ago quarter’s figures of 17,873 units or $8.23 billion.

LEN’s Margins

The bottom line of Lennar is expected to have trended south due to its increased approach toward high sales incentives, lower ASP of home deliveries, decreased revenues per square and increased land costs. The company expects the homebuilding gross margin to be around 18%, indicating a year-over-year decline from 22.6%. Higher mortgage rates likely pressured Lennar’s ability to maintain strong pricing.

Meanwhile, Lennar expects homebuilding selling, general and administrative (SG&A) expenses, as a percentage of home sales, to be in the range of 8-8.2%. Our model predicts homebuilding SG&A to be 8.2% compared with the year-ago quarter’s figure of 7.5%.

Financial Services operating earnings are expected to be $135-$145 million. Our model predicts the metric to decline 7.5% to $136 million.

What Our Quantitative Model Predicts for LEN Stock

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. But that is not the case here, as you will see below.

LEN’s Earnings ESP: The company has an Earnings ESP of -6.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

LEN’s Zacks Rank: Lennar currently carries a Zacks Rank #4 (Sell).

Stocks With the Favorable Combination

Here are some stocks from the Zacks Construction space that investors may consider, as our model shows that these have the right combination of elements to beat estimates this time around.

Dycom Industries, Inc. DY has an Earnings ESP of +0.51% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dycom’s earnings for the quarter-to-be-reported are expected to increase 16.7%. The company reported better-than-expected earnings in each of the last four quarters, the average surprise being 21.5%.

TopBuild Corp. BLD currently has an Earnings ESP of +1.31% and a Zacks Rank of 3.

TopBuild reported better-than-expected earnings in three of the last four quarters and missed once, the average surprise being 0.5%. The company’s earnings for the quarter-to-be-reported are expected to decrease 5.9%.

Martin Marietta Materials, Inc. MLM currently has an Earnings ESP of +2.2% and a Zacks Rank of 3.

Martin Marietta ‘s earnings for the quarter-to-be-reported are expected to increase 5.5%. The company reported better-than-expected earnings in one of the last four quarters and missed thrice, the average negative surprise being 2.8%.

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

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