On Friday, Keefe, Bruyette & Woods made adjustments to their outlook on shares of Lennar Corporation (NYSE: NYSE:LEN), reducing the price target to $170.00 from a previous $210.00. The firm has maintained an Outperform rating on the shares of the home construction company.
The adjustment comes after a reassessment of the company's earnings per share (EPS) for the years 2025-2026, which are now projected to decrease by 6-10%. This revision is based on an anticipated lower gross margin of 21.5-22.0%, down from the prior estimate of 22.4%.
The analyst from Keefe, Bruyette & Woods cited several factors influencing the revised outlook. Elevated incentives and a modest improvement after the first quarter of 2025 were mentioned as key considerations.
Despite a recent 18% decline in Lennar's share price over the past month, the firm believes that the company's valuation is close to cyclical trough levels, excluding periods affected by COVID and the Global Financial Crisis (GFC), which indicates potential for future upside.
Comparatively, peers D.R. Horton, Inc. (DHI) and Toll Brothers , Inc. (NYSE:TOL) have experienced similar downturns in their stock prices, currently trading at 1.5-1.8 times current and forward book value. The sector as a whole is trading at 1.2-1.4 times, suggesting that these companies are somewhat further from their cyclical troughs.
The firm's projections for Lennar's 2025-2026 performance include a return on equity (ROE) of 15%. Moreover, a potential uplift of 300-400 basis points is anticipated from the pending land-spin off. The analyst believes that this strategic move should eventually bolster the company's valuation. Despite the lowered price target, Keefe, Bruyette & Woods continues to see Lennar as a stock with an Outperform rating.
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