Lennar (NYSE: LEN) has headwinds in 2024, including margin pressure, but that is the worst news. While the housing market at large is tepid, conditions favor home builders, driving business, cash flow, and capital returns. Looking forward, there is a catalyst for 2025 in FOMC rate cuts.
High rates and affordability impact consumer demand today, but the headwind is expected to become a tailwind as the rate-cut process progresses. To paraphrase comments from Lennar CEO Stuart Miller, the market is only expected to strengthen over time as affordability improves.
Lennar Outperforms in Q3; Guidance Underwhelms
Lennar had a solid quarter in Q3, with deliveries and backlog growing compared to the prior year. The company reported 49.4 billion in net revenue for a gain of 7.7% over last year, outpacing expectations by 260 basis points. The gain was driven by a 16% increase in deliveries offset by a "slightly" lower average selling price impacted by mix and incentives. Mix and incentives also impacted the margin, which contracted compared to last year but less than the consensus forecast reported by MarketBeat.
The new home gross margin contracted by 190 basis points, offset by improved SG&A. The net margin on home sales contracted by 180 basis points, leaving ...
