On Friday, BTIG adjusted its price target for Lennar Corporation (NYSE:LEN), a leading home construction company, to $177.00, up from the previous target of $170.00. The firm continues to recommend a Buy rating on the stock. The adjustment follows Lennar's first-quarter earnings report for 2024, which revealed earnings per share (EPS) of $2.57. This figure surpassed both BTIG's estimate of $2.20 and the consensus estimate of $2.21.
Despite the positive earnings outcome, Lennar's shares experienced a 7.6% decline on Friday. The market reaction is attributed to a slight increase in 10-year Treasury rates, management's remarks about an uptick in debt levels in mortgage applications, and some confusion regarding Lennar's announcement about spinning off some land assets into a new taxable entity.
BTIG highlights several key factors in Lennar's performance that support a positive long-term outlook. These include strategic efforts to enhance product consistency and efficiency, which are expected to contribute to volume growth and improved margins. Additionally, Lennar has demonstrated a strong commitment to share repurchases, exceeding BTIG's expectations for the quarter, and has maintained one of the fastest growth rates in the industry.
In light of these developments, BTIG has revised its earnings estimates for Lennar. The forecast for FY24 EPS has been increased to $15.20 from $14.65, and for FY25 EPS to $16.95 from $16.30. The revised estimates factor in better-than-anticipated volumes, financial services income, and a lower tax rate for both years.
The firm believes that Lennar's business model is on a trajectory towards sustainably higher returns and cash generation, which has led to the raised price target and the reiteration of the Buy rating.
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