Lennar Corporation (NYSE:LEN) reported second-quarter earnings that missed analyst expectations, while revenue exceeded estimates. The company’s gross margin forecast came roughly in line with projections.
Following the release, Lennar’s shares rose over 2% in premarket trading on Tuesday.
For the quarter ended May 31, Lennar posted adjusted earnings per share of $1.90, slightly below the analyst consensus of $1.94. Revenue came in at $8.38 billion, surpassing the estimated $8.18 billion.
The homebuilder delivered 20,131 homes in Q2, marking a 2% year-over-year increase. However, the average sales price dropped 9% to $389,000 compared to $426,000 in the same period last year, reflecting softer market conditions.
New orders rose 6% to 22,601 homes. For Q3, Lennar forecasts new orders between 22,000 and 23,000, slightly below the Bloomberg consensus estimate of 23,674.
“While we continue to see softness in the housing market due to affordability challenges and declining consumer confidence, we stuck to our strategy of driving starts, sales, and closings to build long-term efficiencies in our business,” said Stuart Miller, Executive Chairman and Co-CEO of Lennar.
Gross margin on home sales was 17.8%, or 18.0% excluding purchase accounting impacts, down from 22.6% in Q2 2024. This compares with the Street consensus of 17.9%. The company expects gross margins to stay “around 18%” in Q3.
RBC Capital Markets analysts noted in a post-release commentary: “The Q3 gross margin guidance of ‘approximately 18%’ is largely in line with our 18.1% and the Street’s 18.1%.”
They added, “Our sense is the buy-side is around ~17.5% for Q3, making the result slightly better than feared but still generally in line with buy-side expectations of flat quarter-on-quarter performance.”
“Some softness in volumes and average selling prices still poses downside risk to EPS, but the modestly better-than-feared gross margin for Q2 and the Q3 guide could be enough to support the stock amid prevailing negative sentiment,” RBC continued.
Separately, Evercore analysts expect investors to focus during the earnings call on whether 18% gross margin represents a near-term floor as Lennar manages sales pace and pricing, seeks clarification on the SG&A miss, and provides updates on share repurchase plans.
During the quarter, Lennar repurchased 4.7 million shares for $517 million. It ended Q2 with $5.4 billion in liquidity and a homebuilding debt-to-total capital ratio of 11.0%.