Lennar Corporation (LEN Quick QuoteLEN - Free Report) reported first-quarter fiscal 2025 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, the top line increased but the bottom line declined.

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The quarter’s performance was impacted by a challenging macroeconomic environment. Although demand remained strong, higher interest rates, inflation and weak consumer confidence made homeownership less accessible. A limited supply of affordable homes added to the difficulties, leading to a decline in the company's average sales price (“ASP”).

To counter the affordability issues, the company adjusted its ASP, incentives and interest rate buydowns. These measures helped align home prices with market conditions, drive sales and manage inventory. However, net home prices and rents in overbuilt apartment markets started to decline as affordability remained a concern.

Moving forward into fiscal 2025, to counter the market uncertainties, LEN aims to focus on its volume-based strategy for driving sales and implement an asset-light, land-light business model.

However, the company’s shares plunged 3% in yesterday’s after-hours trading session. Investors’ sentiments might have been hurt by lower order value and along with higher selling, general and administrative (SG&A) guidance for the second quarter of fiscal 2025.

LEN’s Quarterly Numbers

Lennar’s adjusted earnings per share (EPS) (excluding mark-to-market gains on technology investments) of $2.14 surpassed the Zacks Consensus Estimate of $1.74 by 23%. In the year-ago quarter, the company reported an adjusted EPS of $2.57.

Lennar Corporation Price, Consensus and EPS Surprise

Lennar Corporation price-consensus-eps-surprise-chart | Lennar Corporation Quote

Total revenues of $7.63 billion also topped the consensus mark of $7.51 billion by 1.6% and increased 4.4% year over year from $7.31 billion.

Segment Details of Lennar

Homebuilding: This segment’s revenues totaled $7.28 billion, up 5% from the prior year quarter. Under the Homebuilding umbrella, home sales contributed $7.24 billion to total revenues, up 4.9% from a year ago. Land sales accounted for $35.3 million, up from $20.8 million in the prior year quarter. The Other homebuilding unit contributed $8 million to homebuilding revenues, down from $8.5 million a year ago.

Home deliveries increased to 17,834 units from 16,798 units in the prior year quarter. The reported figure topped our model’s projection of 17,362 units for the quarter. The ASP of homes delivered was $408,000, down 1.2% from the year-ago figure due to continued weakness in the market. We predicted ASP to be $410,580 for the quarter.

New orders increased 1% from the year-ago quarter to 18,355 homes. However, the potential value of net orders fell year over year to $7.43 billion from $7.74 billion.

Backlog at the fiscal first-quarter end declined 19.2% from the year-ago quarter to 13,145 homes. Potential housing revenues from backlog decreased year over year to $5.77 billion from $7.43 billion.

The gross margin on home sales was 18.7% for the quarter, down 310 basis points (bps) year over year. Notably, the reported figure came below our projection of 19.1% for the quarter. The decline was mainly due to decreased revenues per square foot and increased land costs year over year. This was partially offset by a decline in construction costs as LEN continued to focus on construction cost savings.

SG&A expenses, as a percentage of home sales, increased 30 bps to 8.5% due to higher marketing and selling expenses.

Financial Services: The segment’s revenues inched up year over year to $277.1 million from $249.7 million. Operating earnings for the quarter also increased to $143.5 million from $131.3 million a year ago.

Lennar Multi-Family: Revenues of $63.2 million in the segment were down from $129.7 million in the prior year quarter. The segment registered an operating loss of $0.02 million for the quarter compared with a loss of $15.6 million a year ago.

Lennar Other: The segment’s revenues totaled $7.4 million, up from $2.5 million a year ago. Its operating loss was $89.3 million compared with a loss of $39.5 million a year ago.

Spin-Off & Acquisition Updates

On Feb. 7, 2025, Lennar completed the spin-off of Millrose Properties, Inc. The company distributed around 80% of Millrose’s stock to its shareholders. As part of the transaction, Lennar transferred $5.6 billion in land assets and $1 billion in cash, including deposits for option contracts. This move aligns with Lennar’s plan to focus on new home manufacturing with an asset-light approach.

On Feb. 10, Lennar acquired Rausch Coleman Homes, a homebuilder based in Arkansas. Lennar took over Rausch’s homebuilding operations, while Millrose received its land assets. With this acquisition, Lennar expanded into new markets across Arkansas, Oklahoma, Alabama, Kansa, and Missouri, while strengthening its presence in Texas, Oklahoma, Alabama and Florida.

Lennar’s Financials

At the fiscal first-quarter end, Lennar had homebuilding cash and cash equivalents of $2.28 billion, down from $4.66 billion at the end of fiscal 2024. LEN has no outstanding borrowings under the $3 billion revolving credit facility, thereby providing $5.3 billion of liquidity.

The total homebuilding debt was $2.21 billion as of the fiscal first-quarter end, down from $2.26 billion at the fiscal 2024-end. Homebuilding debt to capital at the fiscal first-quarter end was 8.9%, up from 7.5% at the fiscal 2024-end.

LEN repurchased 5.2 million shares for $703 million in the fiscal first quarter.

LEN’s Fiscal Q2 2025 Guidance

For the second quarter of fiscal 2025, the company expects deliveries to be in the range of 19,500-20,500 homes, depicting growth from 19,690 homes delivered in the year-ago period considering the midpoint. The company expects the ASP of the delivered units to be in the range of $390,000-$400,000 compared with the ASP of $426,000 reported a year ago.

The gross margin on home sales is expected to be around 18%, down from 22.6% reported a year ago. SG&A expenses, as a percentage of home sales, are likely to be in the range of 8-8.2%, up year over year from 7.5%.

New orders are likely to be within 22,500-23,500 units, up from 21,293 homes reported a year ago.

Financial Services operating earnings are expected to be between $135 million and $145 million, down from $146 million a year ago.

LEN’s Zacks Rank & Stocks to Consider

Lennar currently carries a Zacks Rank #3 (Hold).

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