Watch This Key Price Level

Key Takeaways

• Lennar shares dropped in extended trading on Monday after the homebuilder issued a lower-than-expected forecast for home deliveries in the current quarter.

• The company forecasts current-quarter home deliveries of between 20,500 and 21,000, with the 20,750 midpoint below analysts’ consensus view of 20,917 units.

• The company topped analysts' fiscal second quarter earnings and revenue estimates as purchasers remained responsive to increased sales incentives.

• Lennar shares may find buying interest around $150 near the lower trendline of a trading range, though a breakdown of this level could indicate a possible double top.

Lennar (LEN) shares dropped more than 2% in extended trading on Monday after the homebuilder’s delivery forecast outweighed quarterly results that came in ahead of Wall Street expectations.

The Florida-based company, which constructs residential homes nationwide, forecasts fiscal third-quarter home deliveries of between 20,500 and 21,000, with the 20,750 midpoint of that projection below analysts' consensus view of 20,917 units. This closely watched metric indicates demand for new homes remains subdued amid mortgage rates sitting near a 20-year high.

However, the homebuilder still logged a strong last quarter. For the three-month period ending May 31, Lennar reported a profit of $3.45 per share, comfortably ahead of expectations of $3.33 a share. Revenue in the period of $8.77 billion grew 9% from a year earlier and topped the $8.48 billion expected by analysts. The company said new orders increased 19% in the quarter, while reporting a backlog of 17,873 homes totaling $8.2 billion.

“Although affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment, purchasers remained responsive to increased sales incentives,” Lennar Executive Chairman and Co-CEO Stuart Miller said in the company’s earnings statement.

Part of those sales incentives related to price reductions. The homebuilder cut the average price per home to $426,000 in the quarter, down from $449,000 a year ago.

Monitor This Level Amid Post-Earnings Weakness

Lennar shares have consolidated within a trading range since early February, helping to establish respected support and resistance areas. More recently, the stock has fallen to the lower portion of the range with the price sitting just below the 50-day moving average, indicating apprehension among market participants ahead of the homebuilder’s quarterly results.

Amid anticipated weakness post earnings, investors should keep an eye on the $150 level as an area where the price may find buying interest from the trading range’s lower trendline. However, it’s also worth pointing out that the stock’s twin peaks between April and May could signal a possible double top if the shares break down below the trading range’s lower trendline, which also acts as the pattern’s neckline. Such a move could see the stock revisit lower support around $133 near the prominent July 2023 swing high.

Lennar shares fell 2.2% to $153.10 in after-hours trading Monday.

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