Lennar (LEN) shares fell early Friday as the homebuilder issued a fiscal third-quarter delivery outlook below market estimates, while its revenue trailed expectations in the previous three-month period amid persistent housing market headwinds.
The company anticipates delivering between 20,500 and 21,500 homes in the ongoing quarter, it said late Thursday. The current consensus on FactSet is for 22,103 home deliveries. The group delivered 20,519 units in the second quarter, up 2% from a year ago, but shy of the Street's view for 20,541 homes.
The stock was down 2.7% in the most recent premarket activity.
For the 2026 full year, Lennar now expects to deliver around 82,000 to 83,000 homes, amid current pressure on interest rates and geopolitical uncertainty, Chief Executive Stuart Miller said in a statement. The company previously projected to deliver 85,000 homes, while the current average analyst estimate is for 83,366 units.
"Our strategy consistently has been to execute around the affordability challenge rather than wait it out," according to Miller. "We have prioritized volume to create durable scale advantages, to deliver that volume at lower prices, and ultimately improve margins."
New orders are pegged to be in a range of 21,000 to 22,000 homes for the third quarter, while the market is looking for 22,630 units. The group also expects gross margin on home sales to be about 16% and forecasts an average sales price of $375,000 to $380,000 for the current quarter.
Per-share earnings came in at $1.24 for the three months through May, down from $1.81 a year earlier, in line with the Street's view for $1.24. Revenue decreased to $7.94 billion from $8.38 billion, trailing the market's expectation for $8.09 billion.
"Our second quarter of fiscal year 2026 was defined by the same stubborn headwinds that have challenged the housing market for the past several years - persistently elevated mortgage rates, constrained affordability, and cautious consumer sentiment, exacerbated by geopolitical uncertainty creating a resurgent inflation reading of 4.2% driven by higher energy prices," Miller said.
Homebuilding revenue slipped to $7.62 billion from $7.84 billion in the prior-year quarter. The average sales price moved down to $371,000 from $389,000 last year due to persistent market weakness. New orders declined 4% to 21,749 homes.
Gross margin on home sales was 15.6%, down from 17.8% a year ago, just shy of analysts' estimate for 15.7%, amid lower revenue per square foot and higher land costs.
Lennar's lower home delivery outlook was "somewhat" offset by positive incentive trends and in-line margin guidance despite weaker volumes, Truist Securities said in a note.
"Overall, we are fairly neutral on these results with some good and some not so good, but we do think it takes a worst-case margin scenario off the table at least for now," the brokerage added.
