Homebuilder Lennar Reports Quarterly Earnings

Homes under construction at the Lennar Bridgeway home development (Justin Sullivan/Getty Images)

Down with the homies

Lennar erases 2024 gains as high rates hamstring US housing

The challenges facing Lennar and other homebuilders shed light on a large vulnerability for the US economic outlook.

12/19/24 11:18AM

Shares of homebuilder Lennar Corp. are down more than 5% in early trading after the company issued underwhelming quarterly results and had a relatively dour outlook on what awaits in the near term.

Their estimated deliveries in Q1? Below Wall Street’s projection. New orders? Also disappointing.

And margins on home sales — something we’ve flagged as a critical difference between the outlook for US homebuilders compared to the rest of the stock market — are expected to sink to their lowest level since the second quarter of 2018.

Selling fewer units than expected as profitability deteriorates is not a recipe for success. Accordingly, shares of Lennar have erased its 2024 gains with Thursday’s big decline.

“In the course of our fourth quarter, the housing market that appeared to be improving as the Fed cut short-term interest rates proved to be far more challenging, as mortgage rates rose almost 100 basis points through the quarter,” said Stuart Miller, co-CEO. “Even while demand remained strong, and the chronic supply shortage continued to drive the market, our results were driven by affordability limitations from higher interest rates.”

Lennar’s business challenges are also indicative of one of the most visible vulnerabilities facing the US economy at large should high interest rates continue to hamstring the housing market.

Housing starts are not trending higher. Total units under construction are trending lower amid a wave of multifamily completions. Employment in residential construction has held up very well amid these softening trends, but may be hard-pressed to do so in a world where would-be homebuyers face “affordability limitations” and homebuilders have weakening margins.

Luke Kawa25m

Corning spikes after Nvidia invests $500 million in the fiber-optics company

Corning is spiking after Nvidia dropped $500 million for the right to buy up to 18 million of its shares.

The deal comes as part of a multiyear partnership that will see Corning “increase its U.S.-based optical connectivity manufacturing capacity by 10x and expand its U.S. fiber production capacity by more than 50% to meet the accelerating demand driven by AI factory buildouts,” per the press release.

The deal is structured around Corning issuing Nvidia two types of warrants:

“Pre-funded” warrants for 3 million Corning shares (which account for the bulk of the $500 million to the fiber-optics company).
“Traditional” warrants that enable Nvidia to buy 15 million shares at $180, thereby benefiting from Corning’s share price trading above that level within three years’ time (unless this partnership is terminated or Corning makes a “fundamental transaction” before that). If and when Nvidia exercises those warrants in full, CEO Jensen Huang will be cutting a much heftier check to Corning.

So while on the surface this deal may not look as big as Nvidia’s recent $2 billion investments in Marvell Technology, Coherent, and Lumentum, once all the dust settles, it could turn out to be considerably more!

Luke Kawa

AMD’s spike reveals just how central CPUs are to the AI boom

“The world has changed, amid sentiment that the CPU growth trajectory has changed,” wrote Morgan Stanley analyst Joseph Moore.

AMD Ryzen 5 2600 Processor close up in the black motherboard CPU socket. Advanced Micro Devices is an American semiconductor company

Helena Cheng2h

AMC gains as strong Q1 results give breathing room for balance sheet improvements

AMC shares are rising in early Wednesday trading after the theater chain reported Q1 earnings results with revenue exceeding estimates after the bell Tuesday.

Key numbers:

Revenue of $1.05 billion (compared to analyst estimates of $972.6 million).
Adjusted EBITDA of $38.3 million (estimate: $7.7 million).

Attendance reached 30.7 million in the US and 16.9 million internationally, with improving demand thanks to recently released movies like “Project Hail Mary,” “The Super Mario Galaxy Movie,” and “Michael.”

A prolonged string of positive operating results like these will be needed to improve AMC’s balance sheet over time. AMC is still carrying around $4 billion in debt, which management is aiming to refinance and pay down over time.

“Refinancing has bought time to delever amid the stop-and-go box-office rebound as film supply is set to improve,” Bloomberg Intelligence analysts Kevin Near and Geetha Ranganathan wrote in the wake of this release. “AMC expects to close more underperforming theaters this year and hinted that positive free cash flow may hinge on a strong 2027 movie slate.”

Analysts at Benchmark upgraded the stock to “buy” from “hold” following these Q1 results.

Rani Molla

Uber Q1 earnings, Q2 guidance come in above Wall Street estimates

Uber reported earnings before the bell Wednesday.