To The Moon

$Lennar(LEN)$ $D.R. Horton(DHI)$ $PulteGroup(PHM)$ Lennar ($LEN) delivered Q3 results that showed strength in demand but continued erosion in profitability. Orders surged, yet the path to earnings power looks increasingly fragile.

📊 Core Results

• Adj. EPS: $2.00 (vs $2.16 est., miss 7%) 🔴

• Revenue: $8.81B (vs $8.76B est., beat 1%) 🟢

• Net Income: $591M, down 49% YoY

• New Orders: 23,004 (+12% YoY, beat high end guidance) 🟢

• Deliveries: 21,584 (missed guidance) 🔴

• Gross Margin: 17.5% (down 500 bps YoY, missed 18% guide) 🔴

Headline EPS of $2.29 included $99M mark-to-market tech gains. Core EPS of $2.00 was at the floor of guidance.

🟢 Bullish Takeaways

• Order Momentum: Incentive-driven demand boosted orders, capturing share in a soft market.

• Buybacks: $507M repurchased this quarter underscores management’s conviction.

• Balance Sheet Flexibility: Homebuilding debt-to-capital ratio at 13.5% with 98% of lots controlled.

🔴 Bearish Pressures

• Severe Margin Compression: Gross margin collapsed from 22.5% to 17.5%. Q4 guide at ~17.5% signals no near-term recovery.

• Low-Quality EPS Beat: Core EPS was the bare minimum, headline supported by volatile tech gains.

• Operating Leverage Gone: SG&A rose to 8.2% from 6.7%, reflecting cost deleverage.

🟡 Themes & Management Signals

• Volume Over Profitability: ASP down 9%, cycle time improved to 126 days, but margins crushed.

• Moderating Volumes Ahead: Q4 orders guided at 20k–21k vs 23k in Q3.

• Tech Spend Elevated: Ongoing SG&A pressure from:

• Lennar Machine (Salesforce + AI automation with McKinsey)

• Land Management System (co-built with Palantir)

• ERP Overhaul (JD Edwards E1)

• Margin Roadmap: New land deals underwritten to ~20% GM vs current 17.5% weighed down by older land.

• Regional Weakness: Seattle, Portland, Bay Area, Sacramento, Phoenix, Vegas, Colorado, Raleigh, Atlanta, Jacksonville.

• Buyer Profile Shift: FHA/VA loans 48% of originations (vs 40% prior year).

📉 Stock Performance Context

• Post-Earnings Pattern: $LEN has traded lower after earnings eight straight quarters (average -5% next day).

• Technical Setup:

• Daily: $132.87 testing EMA cluster near $134–$135.

• 4H: Breakdown below $133–134 support, eyeing $128.

• Weekly: Bounce from $110 July lows, stalled under resistance near $135.

• Valuation Lens:

• Avg PT: $127.79 (-3.8% downside).

• Range: $95 to $161.

• Analyst stance: 75% Hold, 25% Buy/Strong Buy.

🧮 Probability-Weighted Frameworks

1. 🔴 Drift-Lower Base Case; 45%

Path: $131.5 → $129 → $127.8, stretch $125.

Trigger: Rejection at $134–$135, sustained closes < $133.

Catalysts: Flat margins, soft order commentary, SG&A leverage absent.

Invalidation: Decisive reclaim > $136 on volume.

2. 🟡 Range-Rebuild Consolidation; 35%

Path: $129–$136 chop, fades at $137–$138.

Trigger: Hammer or higher low above $129.

Catalysts: Seasonal closings, cycle time efficiency, SG&A ticks lower.

Invalidation: Daily close < $128 not reclaimed.

3. 🟢 Relief-Rally Squeeze; 20%

Path: $137.5 → $141–$144.

Trigger: Gap-down fill, strong close > $136.

Catalysts: Peer strength, early Q4 order traction, faster land rotation.

Invalidation: Loss of $133 after breakout.

📌 Key Levels

• Resistance: $136, $137.5, $141–$144.

• Support: $131.5, $129, $127.8, $125.

• Bull/Bear Line: $136.

⚖️ The Take

Lennar is gaining share, but the cost to profitability is steep. The pivot to moderating volume shows management recognizes the limits of incentives. Until land portfolio rotation and tech leverage deliver, margins remain stuck.

👉❓Does Lennar’s promise of future margin recovery through new land underwriting and tech systems outweigh the near-term pain of soft affordability and elevated SG&A?

This is less about guessing the print and more about mapping the tape’s most probable paths.

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