Shares of Lennar Corp. (LEN) plunged in pre-market trading after the company’s fourth-quarter results disappointed Wall Street analysts. Lennar is the second-largest homebuilder in the U.S. The company’s Fiscal fourth quarter adjusted earnings fell by 22.1% year-over-year to $4.03 per diluted share, below consensus estimates of $4.15 per share.
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Furthermore, the company’s revenues declined by 9.3% year-over-year to $9.9 billion in the fourth quarter, below Street estimates of $10.1 billion.
Lennar’s Management Comments on the Results
Stuart Miller, Executive Chairman and Co-CEO of Lennar, commented that during the fourth quarter, “The housing market that appeared to be improving as the Fed cut short-term interest rates, proved to be far more challenging as mortgage rates rose almost 100 basis points through the quarter.”
As a result, Miller stated that even as demand remained strong, “the chronic supply shortage continued to drive the market, our results were driven by affordability limitations from higher interest rates.”
LEN Plans to Spin-Off Millrose Properties
Additionally, the company announced plans to spin off Millrose Properties and intends to distribute 80% of Millrose Properties’ outstanding shares to its existing Class A and Class B shareholders. Following this distribution, Lennar intends to divest the remaining 20% of Millrose through a spinoff. Millrose Properties, a new entity, will focus on land acquisitions, horizontal development, and homesite option purchase agreements.
LEN Issues Q1 Guidance
Looking ahead, the company expects new orders in the range of 17,500 to 18,000, with an average sales price between $410,000 and $415,000. The company has forecasted gross margin as a percentage on home sales in the range of 19% to 19.25%.
Is LEN a Good Stock to Buy?
Analysts remain cautiously optimistic about LEN stock, with a Moderate Buy consensus rating based on six Buys, nine Holds, and one Sell. Over the past year, LEN has inched by 0.6%, and the average LEN price target of $191.38 implies an upside potential of 31.2% from current levels.
