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Lennar Stock Down on Q3 Earnings Miss, New Home Orders Rise Y/Y
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Key Takeaways
{\"0\":\"Lennar posted Q3 EPS of $2.00 and revenues of $8.81B, both missing consensus estimates.\",\"1\":\"Home deliveries rose 0.3% to 21,584 units, while ASP fell 9.2% to $383,000.\",\"2\":\"New orders climbed 12% to 23,004 homes, but order value slipped to $8.44B from $8.56B.\"}
Lennar Corporation (LEN - Free Report) reported dismal results for the third quarter of fiscal 2025, wherein its adjusted earnings and total revenues missed the Zacks Consensus Estimate. Also, both metrics tumbled on a year-over-year basis.
The quarter’s performance was adversely impacted by the softness in the housing market due to ongoing affordability challenges and a decline in consumer confidence. To counter the affordability issues, the company’s initiative of lowering the average sales price (ASP) adversely impacted revenue growth during the quarter.
The company’s shares lost 3.1% in yesterday’s after-hours trading session. Investors’ sentiments might have been hurt by lower order value, and along with lower gross margin on home sales and higher selling, general and administrative (SG&A) guidance for the fourth quarter of fiscal 2025.
Nonetheless, Lennar is focusing on scale and technology investments to drive cost efficiencies. A strong balance sheet and disciplined execution are expected to support margin improvement as conditions stabilize.
Although interest rates remained high through most of the third quarter, they moved lower toward the end along with the Fed’s recent rate cut. This shift is expected to give the market time to adjust as Lennar moderates volumes. Looking ahead, the company continues to see long-term housing demand and is focusing on affordability, even-flow production, and cost efficiency through scale.
LEN’s Quarterly Numbers
Lennar’s adjusted earnings per share (EPS) (excluding mark-to-market gains on technology investments) of $2.00 missed the Zacks Consensus Estimate of $2.12 by 5.6%. In the year-ago quarter, the company reported an adjusted EPS of $3.90.
Lennar Corporation Price, Consensus and EPS Surprise
Total revenues of $8.81 billion missed the consensus mark of $9.04 billion by 2.5% and declined 6.4% year over year from $9.42 billion. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)
Segment Details of Lennar
Homebuilding: This segment’s revenues totaled $8.25 billion, down 8.8% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $8.21 billion to total revenues, down 8.9% from a year ago. Nonetheless, land sales accounted for $30.5 million, up from $19.5 million in the prior-year quarter. The Other homebuilding unit contributed $9.6 million to homebuilding revenues, up from $8.6 million a year ago.
Home deliveries increased 0.3% to 21,584 units from 21,516 units in the prior-year quarter. The reported figure missed our model’s projection of 22,730 units for the quarter. The ASP of homes delivered was $383,000, down 9.2% from the year-ago figure due to continued weakness in the market. We predicted ASP to be $382,790 for the quarter.
New orders increased 12% from the year-ago quarter to 23,004 homes. However, the potential value of net orders fell year over year to $8.44 billion from $8.56 billion.
Backlog at the fiscal third-quarter end was 16,953 homes, slightly up from 16,944 homes in the year-ago quarter. Potential housing revenues from backlog decreased year over year to $6.65 billion from $7.75 billion.
The gross margin on home sales was 17.5% for the quarter, down 500 basis points (bps) year over year. Notably, the reported figure came below our projection of 18.2% for the quarter. The decline was mainly due to decreased revenues per square foot and increased land costs year over year. This was partially offset by a decline in construction costs as LEN continued to focus on construction cost savings.
SG&A expenses, as a percentage of home sales, increased 150 bps to 8.2% due to less leverage as a result of lower revenues and higher marketing and selling expenses.
Financial Services: The segment’s revenues grew 15% year over year to $314.2 million from $273.3 million. Operating earnings for the quarter also increased to $177.9 million from $144.4 million a year ago.
Lennar Multi-Family: Revenues of $228.5 million in the segment were significantly up 144.5% from the prior-year quarter. The segment registered an operating loss of $16.5 million for the quarter against operating earnings of $78.9 million a year ago.
Lennar Other: The segment’s revenues totaled $13.9 million, up from $3.6 million a year ago. Its operating earnings were $62.5 million compared with $20.1 million a year ago.
Lennar’s Financials
At the fiscal third-quarter end, Lennar had homebuilding cash and cash equivalents of $1.41 billion, down from $4.66 billion at the end of fiscal 2024. LEN had $1.1 billion worth of outstanding borrowings under the $3.1 billion revolving credit facility.
The total homebuilding debt was $3.52 billion as of the fiscal third-quarter end, up from $2.26 billion at the fiscal 2024 end. Homebuilding debt to capital was 13.5%, up from 7.5% at the fiscal 2024-end.
LEN repurchased 14 million shares for $1.73 billion during the first nine months of fiscal 2025.
Lennar Unveils Q4 Guidance
For the fourth quarter of fiscal 2025, the company expects deliveries to be in the range of 22,000-23,000 homes, depicting growth from 22,206 homes delivered in the year-ago period. LEN expects the ASP of the delivered homes to be in the range of $380,000-$390,000 compared with $430,000 reported a year ago.
The gross margin on home sales is expected to be about 17.5%, down from 22.1% reported a year ago. SG&A expenses, as a percentage of home sales, are likely to be in the range of 7.8-8.0%, up year over year from 7.2%.
New orders are likely to be within 20,000-21,000 units, up from 16,895 homes reported a year ago.
Financial Services operating earnings are expected to be between $130 million and $135 million, down from $154 million reported a year ago.
Some better-ranked stocks from the Construction sector are Everus Construction Group Inc. (ECG - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , each flaunting a Zacks Rank #1 at present.
Everus Construction delivered a trailing four-quarter earnings surprise of 42.7%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 18% and 3.9%, respectively, from the year-ago period’s levels. ECG stock has gained 24.5% year to date.
EMCOR Group delivered a trailing four-quarter earnings surprise of 16.8%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 15% and 16.7%, respectively, from the prior-year levels. EME stock has jumped 38.6% year to date.
Great Lakes Dredge & Dock delivered a trailing four-quarter earnings surprise of 45.3%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 9% and 21.4%, respectively, from the prior-year levels. GLDD stock has gained 8.6% year to date.
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Lennar Stock Down on Q3 Earnings Miss, New Home Orders Rise Y/Y
Key Takeaways
Lennar Corporation (LEN - Free Report) reported dismal results for the third quarter of fiscal 2025, wherein its adjusted earnings and total revenues missed the Zacks Consensus Estimate. Also, both metrics tumbled on a year-over-year basis.
The quarter’s performance was adversely impacted by the softness in the housing market due to ongoing affordability challenges and a decline in consumer confidence. To counter the affordability issues, the company’s initiative of lowering the average sales price (ASP) adversely impacted revenue growth during the quarter.
The company’s shares lost 3.1% in yesterday’s after-hours trading session. Investors’ sentiments might have been hurt by lower order value, and along with lower gross margin on home sales and higher selling, general and administrative (SG&A) guidance for the fourth quarter of fiscal 2025.
Nonetheless, Lennar is focusing on scale and technology investments to drive cost efficiencies. A strong balance sheet and disciplined execution are expected to support margin improvement as conditions stabilize.
Although interest rates remained high through most of the third quarter, they moved lower toward the end along with the Fed’s recent rate cut. This shift is expected to give the market time to adjust as Lennar moderates volumes. Looking ahead, the company continues to see long-term housing demand and is focusing on affordability, even-flow production, and cost efficiency through scale.
LEN’s Quarterly Numbers
Lennar’s adjusted earnings per share (EPS) (excluding mark-to-market gains on technology investments) of $2.00 missed the Zacks Consensus Estimate of $2.12 by 5.6%. In the year-ago quarter, the company reported an adjusted EPS of $3.90.
Lennar Corporation Price, Consensus and EPS Surprise
Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote
Total revenues of $8.81 billion missed the consensus mark of $9.04 billion by 2.5% and declined 6.4% year over year from $9.42 billion. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)
Segment Details of Lennar
Homebuilding: This segment’s revenues totaled $8.25 billion, down 8.8% from the prior-year quarter. Under the Homebuilding umbrella, home sales contributed $8.21 billion to total revenues, down 8.9% from a year ago. Nonetheless, land sales accounted for $30.5 million, up from $19.5 million in the prior-year quarter. The Other homebuilding unit contributed $9.6 million to homebuilding revenues, up from $8.6 million a year ago.
Home deliveries increased 0.3% to 21,584 units from 21,516 units in the prior-year quarter. The reported figure missed our model’s projection of 22,730 units for the quarter. The ASP of homes delivered was $383,000, down 9.2% from the year-ago figure due to continued weakness in the market. We predicted ASP to be $382,790 for the quarter.
New orders increased 12% from the year-ago quarter to 23,004 homes. However, the potential value of net orders fell year over year to $8.44 billion from $8.56 billion.
Backlog at the fiscal third-quarter end was 16,953 homes, slightly up from 16,944 homes in the year-ago quarter. Potential housing revenues from backlog decreased year over year to $6.65 billion from $7.75 billion.
The gross margin on home sales was 17.5% for the quarter, down 500 basis points (bps) year over year. Notably, the reported figure came below our projection of 18.2% for the quarter. The decline was mainly due to decreased revenues per square foot and increased land costs year over year. This was partially offset by a decline in construction costs as LEN continued to focus on construction cost savings.
SG&A expenses, as a percentage of home sales, increased 150 bps to 8.2% due to less leverage as a result of lower revenues and higher marketing and selling expenses.
Financial Services: The segment’s revenues grew 15% year over year to $314.2 million from $273.3 million. Operating earnings for the quarter also increased to $177.9 million from $144.4 million a year ago.
Lennar Multi-Family: Revenues of $228.5 million in the segment were significantly up 144.5% from the prior-year quarter. The segment registered an operating loss of $16.5 million for the quarter against operating earnings of $78.9 million a year ago.
Lennar Other: The segment’s revenues totaled $13.9 million, up from $3.6 million a year ago. Its operating earnings were $62.5 million compared with $20.1 million a year ago.
Lennar’s Financials
At the fiscal third-quarter end, Lennar had homebuilding cash and cash equivalents of $1.41 billion, down from $4.66 billion at the end of fiscal 2024. LEN had $1.1 billion worth of outstanding borrowings under the $3.1 billion revolving credit facility.
The total homebuilding debt was $3.52 billion as of the fiscal third-quarter end, up from $2.26 billion at the fiscal 2024 end. Homebuilding debt to capital was 13.5%, up from 7.5% at the fiscal 2024-end.
LEN repurchased 14 million shares for $1.73 billion during the first nine months of fiscal 2025.
Lennar Unveils Q4 Guidance
For the fourth quarter of fiscal 2025, the company expects deliveries to be in the range of 22,000-23,000 homes, depicting growth from 22,206 homes delivered in the year-ago period. LEN expects the ASP of the delivered homes to be in the range of $380,000-$390,000 compared with $430,000 reported a year ago.
The gross margin on home sales is expected to be about 17.5%, down from 22.1% reported a year ago. SG&A expenses, as a percentage of home sales, are likely to be in the range of 7.8-8.0%, up year over year from 7.2%.
New orders are likely to be within 20,000-21,000 units, up from 16,895 homes reported a year ago.
Financial Services operating earnings are expected to be between $130 million and $135 million, down from $154 million reported a year ago.
LEN’s Zacks Rank & Stocks to Consider
Lennar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks from the Construction sector are Everus Construction Group Inc. (ECG - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , each flaunting a Zacks Rank #1 at present.
Everus Construction delivered a trailing four-quarter earnings surprise of 42.7%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 18% and 3.9%, respectively, from the year-ago period’s levels. ECG stock has gained 24.5% year to date.
EMCOR Group delivered a trailing four-quarter earnings surprise of 16.8%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 15% and 16.7%, respectively, from the prior-year levels. EME stock has jumped 38.6% year to date.
Great Lakes Dredge & Dock delivered a trailing four-quarter earnings surprise of 45.3%, on average. The Zacks Consensus Estimate for 2025 sales and EPS indicates growth of 9% and 21.4%, respectively, from the prior-year levels. GLDD stock has gained 8.6% year to date.