Shares of Lennar have underperformed its industry in the past six months. Estimates have also been trending downward over the past two months, limiting the stock’s upside potential. The downside was primarily due to its weak 2019 guidance for gross margin and a deceleration in growth (in mid-single digits) in 2020. Again, rising land and labor costs are threatening margins as they limit homebuilders’ pricing power. Moreover, ongoing housing market headwinds have impacted the homebuilding industry performance as a whole. Nonetheless, Lennar remains well poised to gain from the diverse revenue mix, steady top-line performance, above-average order growth and improving SG&A leverage. SG&A expenses, as a percentage of revenues from home sales, contracted 70 bps the first nine months of 2018.