LENNAR CORP /NEW/ (LEN) Q1 2025 Earnings Summary

Executive Summary

Q1 2025 results were resilient amid affordability headwinds: revenue $7.63B, GAAP diluted EPS $1.96, and adjusted EPS $2.14 excluding mark‑to‑market losses on technology investments . Both revenue and adjusted EPS beat S&P Global consensus (Revenue: $7.43B*, EPS: $1.71*), while GAAP EPS reflects tech investment losses; new orders (18,355) and deliveries (17,834) exceeded guidance highs .
Margins compressed: homebuilding gross margin 18.7% (18.8% before purchase accounting), SG&A 8.5%, net margin on home sales 10.2% as elevated incentives (~13%) bridged affordability; ASP declined 1% YoY to $408K .
Strategic pivot advanced: completed Millrose spin‑off (asset‑light land banking REIT) and closed Rausch Coleman acquisition to expand footprint; controlled homesites rose to 98%, owned supply fell to 0.2 years, inventory turn improved to 1.7x .
Capital allocation: repurchased 5.2M shares for $703M; ended with $2.3B homebuilding cash and 8.9% homebuilding debt/total capital; no drawings on $3.0B revolver .
Near‑term guide: Q2 2025 deliveries 19,500–20,500, ASP $390–$400K, gross margin ~18%, SG&A 8.0–8.2%, Financial Services OE $135–$145M; management remains focused on even‑flow production and cash flow over margin maximization .
Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well
- Deliveries (17,834) and new orders (18,355) exceeded high‑end guidance, reflecting effective “Lennar machine” (digital/dynamic pricing) and even‑flow execution .
- Cycle time fell to 137 days (−11% YoY) and inventory turn rose to 1.7x, supporting efficiency gains and cash conversion .
- Asset‑light transition accelerated: Millrose spin‑off completed; controlled homesites 98%, owned supply 0.2 years—lowest in company history .
- Quote (Stuart Miller): “We are pleased to report our 2025 first quarter results that were both constructive and strategic…we completed the purchase of Rausch Coleman Homes…” .
- Financial Services operating earnings increased to $143M on higher Lennar deliveries .
What Went Wrong
- Gross margin compressed to 18.7% (vs. 21.8% LY) and SG&A rose to 8.5% (vs. 8.2% LY) due to higher incentives, land costs, and marketing spend; ASP declined to $408K (−1% YoY) .
- “Lennar Other” operating loss widened to $89M on technology investment mark‑to‑market losses; NOVA and OPEN were notable detractors .
- Effective tax rate increased to 24.6% (vs. 22.7% LY) as excess tax benefits and solar credits declined .
- Management acknowledged ~13% incentives pressuring margins; normalized incentives of 5–6% would imply mid‑20s gross margins longer term .
- Multifamily was breakeven (vs. $16M loss LY), but apartment market rents remain pressured in overbuilt regions per management commentary .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Total Revenues ($USD Billions)	$9.42	$9.95	$7.63
GAAP Diluted EPS ($)	$4.26	$4.06	$1.96
Adjusted EPS ex tech ($)	$3.90	$4.03	$2.14
Homebuilding Gross Margin %	22.5%	22.1%	18.7% (18.8% pre‑PA)
SG&A % of Home Sales	6.7%	7.2%	8.5%
Deliveries (Homes)	21,516	22,206	17,834
Avg Sales Price Delivered ($)	$422,000	$430,000	$408,000

Segment Breakdown (Q1 2025 vs Q1 2024)

Segment	Q1 2025 Revenues ($MM)	Q1 2024 Revenues ($MM)	Q1 2025 Operating Earnings ($MM)	Q1 2024 Operating Earnings ($MM)
Homebuilding	$7,283.9	$6,931.0	$809.3	$1,028.8
Financial Services	$277.1	$249.7	$143.5	$131.3
Multifamily	$63.2	$129.7	$(0.0)	$(15.6)
Lennar Other	$7.4	$2.5	$(89.3)	$(39.5)

Key KPIs and Operating Metrics

KPI	Q1 2025	Q1 2024
New Orders (Homes)	18,355	18,176
New Orders ($USD Billions)	$7.43	$7.74
Backlog (Homes)	13,145	16,270
Backlog ($USD Billions)	$5.77	$7.43
Avg Sales Price (Deliveries) ($)	$408,000	$413,000
Gross Margin % on Home Sales	18.7% (18.8% pre‑PA)	21.8%
SG&A % of Home Sales	8.5%	8.2%
Cycle Time (days)	137	154
Starts Pace / Sales Pace (homes per community per month)	4.0 / 4.1	n/a
Inventory Turn (x)	1.7	1.5
Controlled Homesites (%)	98%	77%
Years Supply of Owned Homesites	0.2 yrs	1.3 yrs
Share Repurchases (shares; $USD MM)	5.2M; $703	n/a
Homebuilding Debt / Total Capital	8.9%	9.6%
Homebuilding Cash & Equivalents ($USD Billions)	$2.28	$4.95

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
New Orders (Homes)	Q1 2025 vs Q2 2025	17,500–18,000	22,500–23,500	Raised (sequential)
Deliveries (Homes)	Q1 2025 vs Q2 2025	17,000–17,500	19,500–20,500	Raised (sequential)
Average Sales Price ($)	Q1 2025 vs Q2 2025	$410K–$415K	$390K–$400K	Lowered
Gross Margin % on Home Sales	Q1 2025 vs Q2 2025	19.0%–19.25%	~18% (ex purchase accounting)	Lowered
SG&A % of Home Sales	Q1 2025 vs Q2 2025	8.7%–8.8%	8.0%–8.2%	Improved (lower)
Financial Services Operating Earnings ($MM)	Q1 2025 vs Q2 2025	$100–$110	$135–$145	Raised
Corporate G&A (% of total revenue)	Q2 2025	n/a	~2%	New
Foundation Contribution	Q2 2025	n/a	$1,000 per delivery	New
Q2 Tax Rate	Q2 2025	n/a	~25.3%	New
Weighted Avg Shares (MM)	Q2 2025	~266	~261	Lowered

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Asset‑light land strategy / Millrose	Intensifying land‑light focus; owned supply 1.1 yrs; controlled 81%	S‑11 filed; aiming for just‑in‑time homesite delivery	Millrose spin‑off completed; controlled 98%, owned 0.2 yrs	Accelerating
Incentives & Affordability	ASP pressure; incentives driving demand	Incentives up to 10.8% in Q4; guide Q1 margin 19–19.25%	~13% incentives; gross margin 18.7%; ASP −1% YoY	Elevated but stabilizing
Cycle time & cost	Cycle time 140 days (−23% YoY)	Cycle time 138 days (−14% YoY); direct cost reductions	Cycle time 137 days (−11% YoY); direct construction costs −2.5% YoY	Improving
Tariffs / Immigration	Shift to domestic inputs; potential cost risk	Monitoring; expect limited impact but preparing	No current cost impact; contingency planning with trade partners	Watching risks
Digital marketing & dynamic pricing (“Lennar machine”)	Matching sales/production pace	Used to correct pace in Q4	Core to hitting pace, converting leads, preventing aged inventory	Embedded discipline
M&A footprint (Rausch Coleman)	n/a	Announced acquisition; ~4,000 deliveries/orders planned for 2025	Closed acquisition; expanded into AR/OK/AL/KS/MO/TX/FL	Executed

Management Commentary

Strategic focus: “We…focus on our strategy of matching production pace with sales pace and maintaining even flow production…we distributed shares of Millrose…[and] completed the purchase of Rausch Coleman Homes” — Stuart Miller .
Margin normalization view: “Our margins are actually quite strong, except for the approximately 13% incentive…normalized incentives should be around 5% to 6%…normalized margin…mid‑20s” — Stuart Miller .
Operating efficiency: “Cycle time…down to 137 days…inventory turn improved to 1.7 times…our production‑first focus has positively impacted production times” — Jon Jaffe .
Asset‑light metrics: “Years supply of owned homesites…0.2 years…controlled homesite percentage…98%…return on inventory of 29.7%” — Company statement .
Capital allocation: “Repurchased $703 million of our common stock…ended the quarter with…cash of $2.3 billion…homebuilding debt to total capital of 8.9%” — Stuart Miller .

Q&A Highlights

Normalized margin & SG&A trajectory: Management expects SG&A and corporate G&A rates to trend lower from current elevated levels as efficiencies scale; SG&A historically ~7% and corporate ~1.5% noted as a framework — Stephen Kim Q&A .
Land underwriting under current incentives: Team is refreshing land cost basis and underwriting deals to today’s incentive environment to sustain >20% gross margins even if incentives do not fully normalize — Alan Ratner Q&A .
Purchase accounting impact & near‑term margin: PA impact ~10 bps in Q1; expected ~20 bps in Q2 given full quarter Rausch activity; selling/closing activity broadly in the guided margin zone — John Lovallo Q&A .
Millrose impact & option discipline: ~100 bps margin impact historically from land‑banking migration; bias to work through assets at lower margins vs deposit walkaways, preserving cash flow and overhead coverage — Michael Rehaut Q&A .
Cash flow model under asset‑light approach: With land increasingly variable, cash generation is expected to approximate earnings over time; share repurchases likely “robust” post transition — Ken Zener Q&A .

Estimates Context

Metric	Consensus (Q1 2025)	Actual (Q1 2025)	# of Estimates
Revenue ($USD Billions)	$7.43*	$7.63	12*
Primary EPS ($) (Adjusted)	$1.71*	$2.14	11*

Values retrieved from S&P Global.*

Implications: Revenue and adjusted EPS beats suggest sell‑side models may need to reflect stronger volume and Financial Services contribution, while gross margin assumptions should remain conservative given ~13% incentives and Q2 margin guide ~18% .

Key Takeaways for Investors

Revenue and adjusted EPS both beat consensus (Revenue $7.63B vs $7.43B*, EPS $2.14 vs $1.71*), driven by volume and Financial Services; GAAP EPS $1.96 reflects tech investment losses . Values retrieved from S&P Global.*
Even‑flow manufacturing discipline is reducing cycle time (137 days, −11% YoY) and improving inventory turn (1.7x), supporting cash flow resilience despite margin pressure .
Asset‑light land model is now structurally in place post Millrose spin; controlled homesites at 98% and owned supply 0.2 years reduce balance sheet risk and enable capital returns .
Near‑term margins likely remain constrained (Q2 guide ~18% vs Q1 18.7%) as incentives (~13%) bridge affordability; normalized incentives (5–6%) support mid‑20s gross margin longer term per management .
Capital deployment remains shareholder‑friendly (5.2M shares repurchased; $2.3B cash; 8.9% homebuilding debt/total capital; no revolver borrowings), providing optionality for buybacks and strategic growth .
Rausch Coleman integration expands lower‑price‑point footprint across key markets; purchase accounting modestly dilutive (~10–20 bps near term) but supportive of volume and market share .
Watch Q2 catalysts: execution vs raised deliveries/new orders guidance, pricing/ASP trajectory ($390–$400K), and any tariff/immigration cost impacts (none observed to date) .