By Shaina Mishkin

Lennar's asset-light business model deserves a new, higher multiple, the company said in a new investor presentation Friday.

Investors weren't immediately sold: The stock was down 4.7% during midday trading, on track for its largest one-day percentage decline since late March, according to Dow Jones Market Data.

The home builder's second-quarter revenue missed Wall Street's expectations, according to financial results released Thursday. Lennar earned $1.24 a share, or $1.31, excluding mark-to-market losses on technology investments, on $7.9 billion in revenue.

The earnings figure was in line with consensus expectations, but revenue fell short of the roughly $8.1 billion analysts expected, according to FactSet. Lennar's results were "just fine," but its guidance was disappointing, Oppenheimer analyst Tyler Batory wrote in a reaction to the report. "The outlook for volume in Q3 was also below our model," he wrote.

Lennar's guidance calls for third-quarter margins on home sales around 16%.

The same housing market headwinds that have long been blowing against builders continued in the second quarter, Lennar CEO Stuart Miller said on an earnings call, but added that the trend is "on balance optimistic."

"Rates remain elevated, a fresh inflation spike is complicating the consumer picture, and the Fed is on hold," he said. "But underlying demand is real and growing, supply is structurally short, our own incentives are [...] slowly declining for the first time in three years, and the government is focused on affordability."

Lennar 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' s Batory earlier this month wrote that the Lennar 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."

In an investor deck published Friday morning, the company made the case that its stock price and price-to-earnings multiple does not reflect the transformation of its business from a builder holding land on its balance sheet to an asset-light company controlling its land through agreements with third parties.

Long-term home builder investors have long argued that companies that moved the land they control off their balance sheets deserve higher valuation multiples -- though that rerating is largely yet to happen.

A common rule of thumb for home builders says to buy at book value and sell at two-times book value. With the exception of NVR, which trades at 5.5-times book value, builders in the iShares U.S. Home Construction exchange-traded fund are trading between 0.6 and 1.7-times their estimated book value over the next 12 months, with larger builders generally commanding higher multiples, according to FactSet.

The strategy limits risk to the company's balance sheet in a market downturn, Lennar wrote in the presentation. Meanwhile, the housing market's long-running undersupply of homes gives it a runway for growth, which in turn leads to lower construction costs, the investor deck says.

Lennar says its strategy warrants higher multiples. "We believe our share price does not reflect our transformation," the company wrote in the presentation, which notes that Lennar shares, trading at 10.2-times price-to-earnings, is lower than the S&P's and the large home builder NVR. That difference "points to an opportunity for our shares to rerate, " the company wrote.

Lennar, which is the third largest builder by market capitalization, is trading at 1.1-times book.

An investor re-evaluation of asset-light home builders could win the stocks higher valuation multiples. But barring that, the stock is likely tied to the kinds of macroeconomic and geopolitical shifts that draw buyers into the housing market -- or push them out.

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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June 12, 2026 15:53 ET (19:53 GMT)

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