By Shaina Mishkin

Home builders have rallied since Berkshire Hathaway said it would buy Taylor Morrison in May. But Lennar, the nation's third-largest builder by market capitalization, has been left behind.

With earnings expected after the market closes on Thursday, investors will be closely watching Lennar's margins on home sales.

Home builders such as LGI Homes, Meritage, and Century Communities are up as much as 10% since the Friday before the Berkshire news was announced. Lennar, however, is roughly flat in the same period.

Part of the explanation is that investors likely don't view the builder, which is among the largest in its industry by market capitalization, as a potential acquisition target.

But its margin compression in a difficult market for home sales isn't helping. Lennar's gross margin on home sales in the most recently reported quarter was 15.2%, and it guided to margins in a range of 15.5% to 16% for the second quarter. That's down from 18.7% in the first quarter of 2025, and 17.8% in its second quarter last year.

The stock has come under pressure this year. Housing demand has remained weak, requiring continued buyer incentives to keep homes selling, and the company's land-banking strategy -- Lennar pays 8.5% interest to its land-banking spinoff Millrose for the land it controls -- faced criticism. Oppenheimer analyst Tyler Batory earlier this month wrote that the company should trade at a book value multiple similar to smaller peers because "its land banking obligations add a layer of fixed cost to gross margin."

The stock is down 12.6% this year, while the iShares U.S. Home Construction exchange-traded fund, which tracks companies related to new-home construction, is down 2.8%, according to FactSet.

Investors will be keeping a close watch on the company's margins when it reports second quarter earnings. Analysts polled by FactSet expect $1.24 a share in earnings on roughly $8.1 billion in revenue, and a roughly 15.7% gross margin on home sales.

Batory, the Oppenheimer analyst, expects an earnings miss.

"Demand likely softened during the quarter, pushing volume near the low end of guidance," the analyst wrote. "Our gross margin views tilt negative with factors like seasonality and lower input costs more than offset by higher mortgage rates and the company's inventory position."

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

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June 11, 2026 02:00 ET (06:00 GMT)

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