BofA Securities Analyst Projects Millrose Spin-Off To Weigh On Lennar's Earnings, Cuts Price Target

Important legal information about the email you will be sending. By using this service, you agree to input your real email address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an email. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity.com: "

BofA Securities Analyst Projects Millrose Spin-Off To Weigh On Lennar's Earnings, Cuts Price Target

, Benzinga - 2:26 PM ET 3/18/2025 default

BofA Securities analyst Rafe Jadrosich updated the price forecast for Lennar Corp ( LEN ) to reflect the impact of the weak housing market and the Millrose Properties spin-off.

The analyst slashed the price forecast to $130 from $140 while retaining a Neutral rating.

Last month, the company completed the spin-off, contributing $5.5 billion in land assets and $1.0 billion in cash.

Jadrosich noted Lennar ( LEN ) will pay Millrose an annual option fee of 8.5%, which is expected to be reflected in the cost of goods sold.

The analyst projected a modest net income headwind from Millrose in 2025 (~2%), which was expected to gradually rise to a 6% headwind by 2027 as the land delivered accrued more interest.

Additionally, Jadrosich expected a 30 basis point headwind to gross margin in 2025, with this impact progressively increasing to 85 basis points by 2027.

The analyst wrote Millrose spin-off lowers their tangible book value (TBV) per share forecast by approximately 17%, but it boosts the analyst’s return on tangible equity (ROTE) forecast by 240bps, 260bps, and 270bps for 2025, 2026, and 2027, respectively.

Meanwhile, Jadrosich expected stronger ROTE tailwinds after 2025 due to the timing of share repurchases.

The analyst projected a $942 million drag on free cash flow (FCF) in 2025 due to the Millrose, which includes a $442 million option payment and a $500 million land deposit related to the spin.

After this initial cash flow headwind, FCF generation is expected to improve with faster inventory turns, added the analyst.

Due to the elevated FCF headwind in 2025, Jadrosich cut the repurchase forecast down to $750 million (from $2.2 billion) but anticipated a significant increase to $2.7 billion in 2026 and $3.0 billion in 2027.

Investors can gain exposure to the stock via iShares U.S. Home Construction ETF and John Hancock Fundamental All Cap Core ETF ( JHAC ) .

LEN Price Action: Lennar ( LEN ) shares are down 0.33% at $118.57 at publication Tuesday.

Read Next:

• Lennar ( LEN ) Analyst Moves To Sidelines, Downgrades Stock And Awaits Better Entry Point

Courtesy: Lennar Corp. ( LEN )