Lennar Corporation: Lower PO; F2Q in-line and GM stabilizes, but land bank costs will continue to rise

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Lennar Corporation: Lower PO; F2Q in-line and GM stabilizes, but land bank costs will continue to rise

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Lennar Corporation

Lower PO; F2Q in-line and GM stabilizes,

but land bank costs will continue to rise

Reiterate Rating: UNDERPERFORM | PO: 77.00 USD | Price: 90.30 USD

F2Q in-line, but F3Q below; lower PO and estimates 14 June 2026

Lennar Corporation (LEN) reported F2Q26 EPS of $1.24 ($1.31 ex. mark-to-market Equity

losses on investments), in-line with consensus (see note: LEN F2Q in-line, trims FY

delivery guide). We lower our F2026E/F2027E EPS estimate by (10%)/(8%) due to lower

Key Changesdeliveries and financial services income. We lower our PO to $77 (from $84), now based

on 1.1x forward P/TB value (from 1.2x) given lower ROTE outlook. We reiterate our (US$) Previous Current

Underperform rating; we believe current valuation is elevated. Price Obj. 84.00 77.00

Option maintenance fees headwind to margins will rise 2026E2027E EPSEPS 6.126.96 5.516.38

Lennar provided additional detail on its land banking exposure, with ~$18.5bn of partner 2028E EPS 8.46 7.53

capital deployed into controlled lots as of F1Q. These arrangements carry an implied

~10% cost of capital, paid via option maintenance fees (OMFs). While OMFs are paid in

cash as incurred, they are capitalized to D&ACORE and only flow through cost of sales RafeResearchJadrosichAnalyst

when homesites are purchased and delivered. This creates a timing mismatch, with BofAS

+1 646 855 5815

current cash outflows exceeding P&L expense, driving continued growth in D&ACORE rafe.jadrosich@bofa.com

(up $237mm QoQ in F2Q, primarily from capitalized OMFs). As Lennar is accruing OMFs Victoria Piskarev

across a multi-year land pipeline but only expensing costs tied to current deliveries, we Research Analyst