To The Moon

$Lennar(LEN)$ The fourth quarter ended November 30, 2024 was reported on December 18, 2024, and not only did the current period fall short of expectations, but the company also lowered its guidance, reflecting the headwinds faced by the real estate industry.

On the other hand, the Federal Reserve's hawkish statement was "confident" that the economy is booming and that they need to see "more data" to support a rate cut.

Financials vs. market expectations

• Q4 revenue came in at $9.95 billion, slightly below expectations of $10.06 billion, but up 8% year-over-year;

• Adjusted EPS of $4.03, below expectations of $4.20

• Delivered 22,206 homes, slightly higher than Q3's 21,516, but down 7% year-over-year.

• The average sales price of delivered homes was $430,000 per unit, down from $441,000 in Q4 last year.

• Undelivered orders were 11,633 homes valued at $5.4 billion, compared with undelivered orders of 16,944 homes valued at $7.7 billion in the third quarter.

• Home sales gross margin of 22.1 percent, down from 22.5 percent in the prior year quarter

Segment Performance

1. Homebuilding: this segment remains the Company's core business, despite the challenges of rising costs and fluctuating market demand.

2. Financial Services: including mortgage and title services, benefited from market opportunities resulting from changes in interest rates.

3. Multifamily residential development: this area also performed well, particularly in metropolitan areas.

Business performance by region

• Florida: strong demand and significant sales growth.

• California: competitive market with increased price pressure.

• Texas: good performance as economic growth drove demand for housing.

Overall, the Company's markets in the South and West regions outperformed the national average.

The Company's Outlook

Looking forward, Lennar expects its results for 2025 to be impacted by changes in the economic environment and interest rate volatility.The company has lowered its guidance for the coming quarters, reflecting a cautious approach to market uncertainty and potential risks.

• For Q1'25, the company expects new orders to be 17,500 - 18,000 units, below market expectations of 20,000 units compared to the

• Average sales price of $410,000 - $415,000, below market expectations of $420,300 vs.

• Gross margin on home sales was 19.0%-19.25%, below market expectations of 20%.

Analysis of Reasons for Performance Variance

The main reasons for Lennar's failure to meet market expectations include:

1. Higher construction costs due to supply chain issues: higher raw material prices have led to higher construction costs, which have squeezed margins.

2. Weak demand due to changes in the interest rate environment: While high interest rates may present opportunities in financial services, they also dampen demand from homebuyers.

3. Increased competition in the market: The increase in new entrants, especially in popular areas, has intensified the price war.