Lennar hit by downgrades after weak profit and margin outlook

Investing.com -- Lennar shares were hit with downgrades on Wall Street after the second largest U.S. homebuilder reported a quarterly profit miss and signaled further pressure on margins as affordability constraints continue to weigh on demand.

The Miami-based company posted fourth-quarter earnings of $1.93 per share, below analysts’ expectations of $2.22, even as revenue of $9.37 billion beat forecasts.

Lennar said affordability pressures remained a key drag on homebuying demand, forcing it to rely on incentives such as mortgage-rate buydowns while facing cost adjustments in a softening market.

Co-CEO Stuart Miller said the housing market stayed under pressure during the quarter despite slightly lower interest rates, with weak consumer confidence and affordability constraints limiting demand.

RBC downgraded Lennar to Underperform, citing risks to any near-term margin recovery and a lack of a clear fix to earnings headwinds.

The brokerage cut its price target to $95 from $106 and said it expects weaker absorption and margins to persist in an affordability-constrained environment, keeping returns depressed into fiscal 2026.

Evercore also downgraded the stock to Underperform after Lennar reported a weaker-than-expected quarter and issued first-quarter guidance that fell short across several metrics.

The firm pointed to softer demand, elevated incentives and continued margin pressure, even as management aims to maintain volumes. Evercore said downside risk to earnings remains if market conditions fail to improve, adding that the stock’s valuation looks stretched relative to peers.

Bank of America downgraded Lennar to Underperform, warning that margins are deteriorating faster than at other builders. It cut its price target to $95 and reduced its fiscal 2026 and 2027 earnings estimates, citing risks that delivery growth could come at the expense of margins.

Company is looking at falling gross margins, rising incentives and higher costs tied to land, commissions and technology investments, while the stock still trades at a premium despite lower expected returns.

You May Also Be Interested In

• BofA maintains underperform ratings on six BDC stocks
• BofA says momentum style supported by earnings revisions
• BMO starts chip stocks coverage: Here are its preferred picks