Raymond James reiterates Lennar stock rating citing mortgage rates

Raymond James maintained its Underperform rating on Lennar (NYSE:LEN) after reviewing the company's third-quarter 2026 results and updated guidance. Over the past year, Lennar's stock price has dropped 39%, trading at $77.63 near its 52-week low of $75.70. Eight analysts have lowered their earnings estimates, with net income projected to decline this year.

The firm highlighted that sticking to production levels instead of short-term margins makes Lennar's earnings outlook vulnerable to mortgage rates and consumer confidence. Thirty-year mortgage rates have risen above 7% for most products. About half of Lennar's potential homebuyers fail to qualify without additional price or incentive reductions.

The company trimmed construction costs per square foot by 6% year-over-year and accomplished a record 116-day sales cycle. Lennar also decreased financial incentives by 90 basis points to 12% of the gross price and reduced unsold homes by 11% quarter-over-quarter. Analysts pointed out that lot cost inflation from landbanking partnerships is hindering Lennar's ability to improve gross margins in the mid-15% range or raise the return on invested capital outlook of around 5% without a significant shift in long-term interest rates.

Lennar's current gross profit margin is 16%, and return on invested capital is 5%. Lennar reported weaker-than-expected Q3 results, with earnings and revenue falling short of analysts' expectations. The homebuilder cited decreased demand and heightened competition from the resale market. Despite these issues, Lennar met its earnings guidance and improved its gross margin slightly.

New orders also fell below expectations and declined from the prior year, signaling a weaker demand in the housing market. Other analysts, such as Truist Securities and Citizens, have also given Lennar a Hold or Market Perform rating, citing the impact of land banking and the company's focus on volume over margin.