Lennar 2025 Q2 Earnings Misses Targets, Net Income Falls 49.8%

Lennar (LEN) reported its fiscal 2025 Q2 earnings on Jun 17th, 2025. Lennar's Q2 2025 results fell short of expectations, with net earnings plunging 49.8% year-over-year to $477 million, or $1.81 per diluted share, compared to $954 million, or $3.45 per diluted share, in the same quarter last year. The company maintained strong liquidity with $5.4 billion and a low homebuilding debt-to-capital ratio of 11.0%. Looking forward, Lennar expects new orders and deliveries between 22,000 and 23,000 homes in the third quarter, with average sales prices ranging from $380,000 to $385,000, indicating ongoing pricing pressure. Gross margins are projected to stabilize around 18%.

Revenue

Lennar's total revenue for fiscal 2025 Q2 decreased by 4.4% to $8.38 billion, compared to $8.77 billion in Q2 2024. The revenue from homebuilding led the segments at $7.84 billion, while the financial services segment contributed $298.10 million. Additionally, the multifamily segment showed revenue of $230.31 million, and Lennar Other added $5.24 million to the total. The decline is primarily attributed to a decrease in average sales price.

Earnings/Net Income

In fiscal 2025 Q2, Lennar's earnings per share (EPS) dropped by 47.5%, reaching $1.81 from $3.45 in Q2 2024. Net income also saw a decline, falling to $481.82 million, a decrease of 49.8% from $960.59 million reported in the previous year. The sharp drop in EPS reflects challenging market conditions.

Price Action

The stock price of Lennar has tumbled 8.23% during the latest trading day, has dropped 7.87% during the most recent full trading week, and has dropped 5.00% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing LEN shares when revenues surpass expectations and holding them for 30 days resulted in disappointing outcomes. The strategy's compound annual growth rate (CAGR) was -0.35%, with an excess return of -69.64% and an overall return of -1.65%. Furthermore, it experienced a high maximum drawdown of -52.65% and displayed a low Sharpe ratio of -0.01, indicating considerable risk and minimal returns. The performance underscores the challenges investors face when relying on revenue beats as a trading signal, particularly in volatile economic conditions. This highlights the importance of considering broader market trends and company-specific factors beyond simple revenue metrics.

CEO Commentary

Stuart Miller, Executive Chairman and Co-CEO, stated that despite a challenging economic environment, Lennar remains focused on driving volume and growth, adjusting margins to enhance affordability. He noted, "We expected that the new normal of higher interest rates for longer would mean lower margins for longer as we drove affordability." Miller emphasized that maintaining production volume is critical to creating efficiencies and adapting to market conditions, remarking on the importance of leveraging technology for future improvements. He expressed cautious optimism, stating, "We believe that we're getting very close to the bottom... and we are well prepared with a strong and growing national footprint."

Guidance

Lennar expects to deliver between 22,000 and 23,000 homes in Q3 2025, with an average sales price projected between $380,000 and $385,000. The gross margin is anticipated to be approximately 18%. Additionally, the company projects an EPS range of $2.00 to $2.20 per share for the quarter. The SG&A percentage is expected to be in the range of 8% to 8.2%, impacted by ongoing investments in technology solutions, reflecting a focus on maintaining cash flow and efficiency amidst market challenges.

Additional News

Lennar Corporation recently announced the unveiling of The Townes at Arbors at Wiregrass, introducing luxury townhomes in Wesley Chapel, FL, with three unique floorplans available for sale. The company also completed its acquisition of Rausch Coleman Homes, marking a strategic expansion into new markets. Furthermore, Lennar issued $700 million in senior notes primarily to redeem $500 million of existing notes, showcasing its commitment to efficient capital management. These actions demonstrate Lennar's focus on growth and innovation amidst challenging market conditions, reinforcing its position as a leading homebuilder in the U.S.