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Lennar (LEN) Faces Pressure Despite Strong Quarterly Results

by Ivy

Lennar Corporation’s (LEN) shares saw a decline of more than 2% in after-hours trading on Monday, reflecting investor concerns over the company’s forward-looking guidance despite posting robust quarterly earnings that exceeded Wall Street’s expectations.

The Florida-based homebuilder, known for its nationwide residential construction projects, projected home deliveries for the fiscal third quarter between 20,500 and 21,000 units. The midpoint of this forecast, at 20,750 units, fell short of analysts’ consensus estimate of 20,917 units. This outlook suggests that demand for new homes remains subdued amidst persistently high mortgage rates, which are currently near a 20-year peak.

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However, Lennar reported strong performance in the last quarter ending May 31, with earnings per share coming in at $3.45, surpassing expectations of $3.33 per share. Revenue for the period totaled $8.77 billion, marking a 9% increase from the previous year and exceeding analysts’ forecasts of $8.48 billion. The company also reported a 19% rise in new orders and a backlog of 17,873 homes valued at $8.2 billion.

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Stuart Miller, Executive Chairman and Co-CEO of Lennar, acknowledged the challenges posed by interest rate movements and consumer sentiment on affordability. Despite these challenges, Miller noted that purchasers responded positively to increased sales incentives during the quarter.

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As part of these incentives, Lennar reduced the average home price to $426,000, down from $449,000 compared to the same period last year.

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Market Reaction and Technical Outlook

Following the earnings announcement, Lennar’s stock has been consolidating within a trading range since early February, establishing notable support and resistance levels. Recently, the stock has retreated towards the lower end of this range, trading just below its 50-day moving average. This movement indicates caution among investors ahead of the quarterly results.

Investors are advised to monitor the $150 level closely, which could attract buying interest as it aligns with the lower trendline of the trading range. However, a breakdown below this level, which also serves as the neckline of a potential double top pattern formed between April and May, could signal further downside. In such a scenario, the stock might revisit support levels around $133, near the significant swing high observed in July 2023.

Lennar’s shares closed down 2.2% at $153.10 in after-hours trading on Monday, reflecting the market’s immediate response to the company’s earnings report and forward guidance.

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