By Shaina Mishkin

Lennar reported better than expected first-quarter earnings and revenue -- but it wasn't the good sign investors were hoping for. The shares were dropping in after-hours trading on a margin miss and commentary about a weak market.

Lennar on Thursday said it earned $1.96 a diluted share on $7.6 billion in revenue, beating FactSet consensus estimates that called for earnings of $1.70 a share on $7.4 billion in revenue. Excluding mark-to-market losses on technology investments, Lennar said it earned $2.14 a share.

The company reported 18,355 new orders, more than the 17,866 analysts had anticipated, and 17,834 home deliveries, above the 17,262 consensus expected.

Lennar's Class A stock was down about 3% in after-hours trading. Investors were likely disappointed by the company's margin, which was 18.7%, lower than the 19.1% analysts were expecting.

A weak housing market led to a decline in home sale prices, Lennar executive chairman and co-CEO Stuart Miller said in a statement. The company's average sales price net of incentives declined 1% from the year prior to $408,000.

"Our first quarter was marked by a challenging macroeconomic environment for home-building," Miller said. "While demand remains strong, persistently higher interest rates and inflation, combined with a downturn in consumer confidence and a limited supply of affordable homes, made it increasingly difficult for consumers to access homeownership."

The company continued to offer incentives to buyers, such as interest rate buy-downs, which lower a buyer's mortgage rate for a period of time, "to reconcile home prices to market conditions," Miller said. "Generally speaking, net prices for homes, together with rents in overbuilt apartment markets, have started to decline, as demand remains constrained by affordability."

Lennar said it expects to deliver between 19,500 and 20,500 homes in the second quarter, in line with the 19,591 expected by FactSet consensus estimates. The company estimated its margin will be about 18% in the current quarter, below the 19.7% analysts expect.

"We remain steadfast in our goals to match our production with sales pace, drive strong current cash flow, and maintain carefully managed inventory levels so that, as market conditions stabilize and ultimately improve, we will benefit from normalized margins across our growing volume," Miller said.

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 was down 6.7% this year as of Wednesday's close, 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.

There was hope that Lennar's first-quarter results would help change the trend. A team of UBS analysts led by John Lovallo wrote earlier this month that they "believe expectations are low and any indication of normal seasonality in recent weeks could provide a positive catalyst for the stocks."

Lennar will discuss its results on a conference call at 11 a.m. Eastern time on Friday.

The company will likely discuss its spinoff land development REIT Millrose, which began trading in February under the ticker MRP. But management's commentary on how the spring season is shaping up could carry more weight for investors evaluating builders as a group.

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.

(END) Dow Jones Newswires

March 20, 2025 17:37 ET (21:37 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.