Lennar (LEN) stock is lower Tuesday after the homebuilder beat analysts' expectations for its fiscal second-quarter results but issued a soft deliveries outlook for its fiscal third quarter.
In the three months ended May 31, Lennar's revenue increased 9% year-over-year to $8.8 billion. The boost in sales was driven by a 15% jump in deliveries to 19,690 homes, while new orders were up 19% to 21,293 homes.
Lennar also said earnings per share (EPS) rose 14.6% from the year-ago period to $3.45.
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"We are pleased to report another strong quarter against the backdrop of evolving market conditions as interest rates rose for most of the quarter and then subsided as the quarter closed," said Stuart Miller, co-CEO of Lennar, in a statement. Miller added that while affordability and consumer sentiment continue to create challenges, "purchasers remained responsive to increased sales incentives."
Lennar's top- and bottom-line estimates came in ahead of analysts' expectations. According to Reuters, Wall Street was anticipating revenue of $8.5 billion and earnings of $3.24 per share.
For its third quarter, Lennar said it expects home deliveries in the range of 20,500 to 21,000. However, the midpoint of this range, 20,750, is below analysts' expectations for 20,917 homes.
Is Lennar stock a buy, sell or hold?
Lennar has underperformed on the price charts so far in 2024, up roughly 5% on a total return basis (price change plus dividends) vs the S&P 500's 15% total return. Still, analysts are upbeat toward the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for LEN stock is $178.05, representing implied upside of nearly 20% to current levels. Additionally, the consensus recommendation is Buy.
But not everyone on Wall Street is sold on the homebuilder. Financial services firm Wedbush, for instance, has an Underperform rating (equivalent to a Sell) on the stock and a $144 price target.
"We believe Lennar's outlook and commentary about potential sales strategies into the summer could have a direct impact on the rest of the entry level, spec focused homebuilders," Wedbush analyst Jay McCanless said in a June 7 note. In addition to elevated mortgage rates, "the competitive threats to Lennar and the industry from higher inventories of new and existing homes for sale versus last year may be another headwind to new home demand."
Wedbush's $144 price target represents implied downside of more than 3% to current levels.
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