By Shaina Mishkin

Investors are still down on home builder stocks. Lennar's first-quarter results could shift that sentiment.

It has been a tough year so far for investors in home builders. Economic and policy concerns have weighed on the entire market, but they have hit home construction companies particularly hard: The iShares U.S. Home Construction exchange-traded fund is down 6.7% this year, a steeper drop than the S&P 500 index's roughly 3.5% decline.

Lennar, one of the nation's largest home builders with a $31 billion market capitalization, is no outlier: the company's Class A shares were down 8.2% year to date as of Wednesday's close, its worst performance across a similar period since 2022, according to Dow Jones Market Data.

But Lennar's first-quarter results, expected Thursday after the market closes, could help change the trend, a team of UBS analysts led by John Lovallo wrote earlier this month. The analysts "believe expectations are low and any indication of normal seasonality in recent weeks could provide a positive catalyst for the stocks," they wrote.

Analysts polled by FactSet expect that Lennar will report earnings of $1.70 a share on $7.4 billion in revenue for its first quarter, compared with $2.57 a share on $7.3 billion in its year-ago quarter. Wall Street is looking for 17,866 new orders and 17,262 deliveries of homes, with a 19.1% gross home builder margin.

The company will likely discuss its spin-off land development REIT Millrose, which began trading in February under the ticker MRP. Millrose's stock got a boost ahead of earnings. While Lennar closed 1.5% higher on Wednesday, Millrose rose 4.7%.

Management's commentary on how the spring season is shaping up could carry more weight for investors evaluating builders as a group. A number of concerns, such as still-expensive housing costs, an increase in the number of homes for sale, potential cost pressures from tariffs, and macroeconomic uncertainty, have weighed on them. Barron's wrote earlier this month that builders could perk up on signs that any of those worries aren't as bad as feared.

Investors with a long time horizon are "sharpening their pencils" on builders, the UBS analysts wrote. "We sense that sentiment is on the cusp of positive inflection, particularly for the builders."

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 20, 2025 02:30 ET (06:30 GMT)

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