On Tuesday, Keefe, Bruyette & Woods (KBW) adjusted their outlook on Lennar Corporation (NYSE:LEN), reducing the company’s price target from $170.00 to $152.00. Despite the cut in the price target, KBW maintained an Outperform rating on the homebuilder’s shares.
The adjustment in Lennar’s price target by KBW was attributed to multiple factors, including a lower expected gross margin and the impact of the Millrose Residential Partners (MRP) land spin-off. Analysts at KBW have revised their earnings per share (EPS) estimates for the years 2025-2026 downwards by approximately 15%, citing a reduced gross margin forecast of 20.3-20.5%, down from the previous 21.5-22.0%. This revision takes into account the currently high incentives and the anticipated effects of the MRP spin-off. The company’s current gross profit margin stands at 22.51%, according to InvestingPro data, which offers comprehensive financial metrics and 12 additional ProTips for Lennar.
In addition to the EPS adjustments, KBW has also lowered its estimated book value for Lennar by $16.64, or 18%, bringing it to $74.05. The forward book value is now set at $81.00, driven by the MRP spin-off, which involves 80% of $5.8 billion. According to KBW, Lennar’s returns on equity (ROE) for 2025-2026 are projected to be between 16-16.5%. This figure is expected to rise as the housing market conditions improve.
KBW’s report further highlighted that Lennar’s stock value has decreased by 25% over the last three months. Currently trading at 1.16 times book value and a P/E ratio of 8.29, the valuation is deemed relatively attractive by the analysts, especially when compared to historical troughs. Despite the lowered price target, the Outperform rating indicates a positive outlook on the stock’s future performance. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with strong financial health metrics and a 48-year track record of consistent dividend payments.
In other recent news, Lennar Corporation has initiated the spin-off process of Millrose Properties, Inc., with shares in Millrose being distributed to eligible Lennar stockholders. This move follows Lennar’s announcement that Sidney Lapidus, a long-standing member of its Board of Directors, will not seek re-election at the upcoming 2025 Annual Meeting of Stockholders, reducing the board size from eleven to ten members.
In the homebuilding sector, stocks of prominent homebuilders, including Lennar, LGI Homes (NASDAQ:LGIH), PulteGroup Inc (NYSE:PHM), Toll Brothers (NYSE:TOL), DR Horton (NYSE:DHI), and Meritage (NYSE:MTH), experienced a significant drop as the market reacted to President Trump’s decision to impose a 25% tariff on Canadian lumber imports. The tariff is expected to increase costs for homebuilders, raising concerns about potential increases in home prices and dampening demand.
Meanwhile, J.P. Morgan Chase Commercial Mortgage Securities Trust and JPMBB Commercial Mortgage Securities Trust have both appointed Rialto Capital Advisors, LLC as their new special servicer for their commercial mortgage-backed securities pool. These are the latest developments in the financial industry.
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