Lennar downgraded to In Line from Outperform at Evercore ISI

Evercore ISI analyst Stephen Kim downgraded Lennar (LEN) to In Line from Outperform with a price target of $131, down from $159, following the fiscal Q1 report. The Q2 gross margin guide of 18% was lower than hoped for, and management indicated that it was due to incentives rising even further from Q1, the analyst tells investors in a research note. The firm says management indicated in a post-earnings call they are willing to tolerate a roughly 8% operating margin for the foreseeable future, despite saying on the earnings call that long-term operating margins are probably closer to 15%. Lennar’s strategy to maintain and incentivize volume is going to keep its profitability “at dramatically depressed levels,” contends Evercore.