Lennar (LEN) PT Lowered to $237 at Evercore ISI
Evercore ISI analyst Stephen Kim lowered the price target on Lennar (NYSE: LEN) to $237.00 (from $238.00) while maintaining a Outperform rating.
The analyst comments "Lennar (LEN) reported 2Q24 (May) adjusted diluted EPS of $3.38, below our $3.44 estimate and above Street consensus of $3.23. All figures exclude a ~$25mm mark-to-market gain related to its investments in HIPO, SMRT, OPEN, NOVA, BLND and SOND. Overall, the company’s results were in-line or modestly above our outlook, as financial services income ($147mm vs. $113mm est.), closings (19.6k vs. 19.4k est.), closing ASP ($426k vs. $422k est.), and gross margins (22.6% vs. 22.5% est.) slightly beat, while orders (+19% y/y vs. +20% y/y) and other income ($60mn vs. $70mn est.) slightly missed our expectations. Meanwhile, LEN remains in an underleveraged position with a -5% net debt/capital ratio, while repurchasing ~$603m of stock, compared to our forecast of $750m, and repaying $554m in debt, vs. our $450m estimate. LEN closed down 5% due in part to continued uncertainty as to the land spin-off, although we note that the company filed its draft registration and raised the amount of land to be spun-off. We anticipate a cash infusion into the spin, as it will not be financed with debt, which reduces upside to near-term share repurchases. Meanwhile, the company’s gross margin guide was encouraging, although investors view the back-end weighted guide as aggressive. Overall, we remain encouraged by Lennar’s progression towards its production-oriented, asset-light business model, and believe it is well positioned to see a revaluation higher as additional details on the land spin-off become available in subsequent quarters. Following 2Q24, we now model FY24 and FY25 EPS of $14.39 (from $14.95) and $16.64 (from $17.27), respectively. We reiterate our Outperform rating on the shares with a target price of $237, which is based on 14.5x our 2026 earnings estimate discounted back 6 quarters at a 10% rate."