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- LEN F3Q25 - Gross margin miss, orders rise. What's next?
LEN F3Q25 - Gross margin miss, orders rise. What's next?
Cheat Sheets presented by stocktwits
LENNAR CORP (LEN)
🏠🔨 Nation's Leading Homebuilder & Asset-Light Strategy Pioneer
Q3 FY2025 Results | $1.4B Cash Position with $23B Stockholders' Equity
💰 Market Cap: $30.6B | 💵 Cash: $1.4B | 🏠 21,584 Q3 Deliveries
👨💼 CEO Stuart Miller | 🔄 Strategic Pause | 🎯 Technology Focus
$127.32
📉 -$5.55 (-4.18%) Today
Post Q3 Results
Price Target Scenarios
18-Month Horizon (2026 Targets)
$170.00
Bull Case (+33%)
Housing Recovery
Margin Expansion
📊 Valuation Calculation:
• 2026E EPS: $13.00 × P/E: 13x = $170.00
🚀 Key Assumptions:
Mortgage rates normalize to 5-6% • Strong demographics drive demand • Asset-light model delivers 20%+ ROE • Margin recovery to 21%+
$142.50
Base Case (+12%)
Stable Growth
Volume Focus
📊 Valuation Calculation:
• 2026E EPS: $11.75 × P/E: 12x = $142.50
⚖️ Key Assumptions:
Gradual margin recovery • Technology gains drive efficiency • Consistent volume delivery • Market share gains continue
$85.00
Bear Case (-33%)
Housing Slump
Margin Pressure
📊 Valuation Calculation:
• 2026E EPS: $8.50 × P/E: 10x = $85.00
🔻 Key Assumptions:
Prolonged high rates • Recession dampens demand • Margin compression continues • Construction cost inflation persists
Bottom Line for Retail Investors
🏠
Homebuilding Leader
Nation's largest homebuilder with 17,834 Q1 deliveries and national scale
🚁
Asset-Light Strategy
Millrose spinoff complete, 98% controlled homesites, capital efficiency focus
📈
Strong Demographics
Chronic housing shortage, first-time buyer demand, population growth tailwinds
📊
Margin Pressure
High mortgage rates, affordability challenges, land cost inflation
📈 Q3 FY2025 "Strategic Pause" Results
Volume Maintained but Margin Compression Drives Strategic Recalibration for Q4
💵
~$8.1B
Q3 Revenue
21,584 Deliveries
📈
$2.29
Q3 EPS
$2.00 Adjusted
💰
$591M
Net Income
$516M Adjusted
📦
17.5%
Gross Margin
Pressure from Incentives
📞 Key Q3 2025 Earnings Call Insights
🔄
Strategic Pause
Q4 delivery guidance reduced to 22K-23K homes, full year to 81.5K-82.5K to establish margin floor
🤖
Technology Leadership
46-second lead response time, dynamic pricing tools, 8% increase in appointments
⏱️
Operational Excellence
126-day cycle time (company record low), 11 consecutive quarters of improvement
💡
Opendoor Partnership
New CEO Kaz from Shopify, AI-driven homeownership solutions, technology integration focus
📍 Marathon Strategy: "We're running a marathon. Partway through, we're just taking a moment to take a breath, let our body catch up to where we are" - CEO Stuart Miller
💰 Q4 2025 Guidance: EPS range of $2.10-$2.30, gross margin ~17.5%, average sales price $380K-$390K, new orders 20K-21K homes
🔮 Rate Environment: "If mortgage rates approach 6% or lower, we will soon see some firming in the market and benefit from stronger affordability and demand"
📊 Q3 FY2025 Performance & Key Metrics
| Metric | Q3 FY2025 | Performance |
|---|---|---|
| Deliveries | 21,584 | Slightly Below Goal |
| New Orders | 23,004 | +12% YoY, Above Expectations |
| Gross Margin | 17.5% | Lower Than Expected |
| Share Repurchases | $507M | 4.1M Shares Repurchased |
Sales Incentives14.3%
Cycle Time (Days)126
🎯 FY2025 Strategic Outlook & Technology Integration
"This is an opportune time to pause and let the market catch up a little bit. We are very optimistic about our future. We will focus on our manufacturing model and continue to use our land partnerships to grow, and we will lean into reshaping our business by developing and using modern technologies with a focus on cash flow and high returns on capital." - CEO Stuart Miller
🚀 Why LEN Bulls Are Right
🏠
Market Leader
Nation's largest homebuilder with scale advantages and national footprint
🚁
Asset-Light Model
Millrose spinoff complete, 98% controlled homesites, superior capital efficiency
📈
Demographics
Chronic housing shortage, millennial demand wave, population growth tailwinds
💰
Strong Balance Sheet
$2.3B cash, no debt on $3B facility, aggressive buybacks, 8.9% debt-to-capital
🐻 Why LEN Bears Have Valid Concerns
📊
Margin Compression
Gross margins fell 310bps to 18.7%, pressure from land costs and pricing
🏦
Mortgage Rate Risk
High mortgage rates limit affordability and constrain buyer demand
📉
Cyclical Exposure
Highly sensitive to economic cycles, recession risk, consumer confidence
⚡
Cost Inflation
Rising land costs, labor shortages, construction material inflation pressure
This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.
