Keefe, Bruyette & Woods analyst Jade J. Rahmani downgraded Lennar Corporation (NYSE:LEN) from Outperform to Market Perform and reduced the price forecast from $152 to $141.
The analyst writes that the company’s valuation is now comparable to large-cap peers, with potential downside risks to estimates.
The analyst expects a challenging Spring selling season and growing risks to gross margin due to the tough macro environment and uncertainty from the Millrose Properties spin-off.
Consequently, Rahmani stated that he had adopted a more cautious approach towards the company. The analyst moves to the sidelines and awaits a better entry point.
While the analyst still sees the company as well-positioned due to several factors, such as its low financial leverage, potential ROE upside from the Millrose spin-off, and capital efficiency initiatives, the current housing market presents significant challenges.
The analyst cut the 2025-2026 estimates by 3%-4% to $11.89 and $13.44.
Rahmani continues to see order growth of 3% – 7% for the period. Meanwhile, the analyst revised estimates for deliveries growth to 5% – 6% (vs. prior estimates of 5% – 7%), gross margin to be 20.0% – 20.3% (vs. 20.3% – 20.5% earlier), and SG&A to 7.6% – 7.7% (vs. 7.6% prior).
Investors can gain exposure to the stock via iShares U.S. Home Construction ETF (BATS:ITB) and John Hancock Exchange-Traded Fund Trust John Hancock Fundamental All Cap Core ETF (NYSE:JHAC).
Price Action: LEN shares are down 3.12% at $121.32 at the last check Tuesday.
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