01:24 PM EDT, 09/11/2024 (MT Newswires) -- Lennar ( LEN ) is showing upside to fiscal third-quarter revenue consensus estimates amid an expected rise in home deal closings, though earnings are seen missing Wall Street's target, Wedbush Securities said Wednesday.

The homebuilder's revenue is seen rising 7% year over year to $9.31 billion in the August quarter, putting Wedbush above the $9.17 billion Refinitiv consensus. An estimated 12% year-over-year unit closing gain to 21,000 will likely be partially offset by a 5% decline in average selling prices, the note showed. In June, Lennar ( LEN ) guided deliveries between 20,500 units and 21,000 units.

The anticipated price decline likely reflects discounting and a mix of smaller square-foot homes compared with the same period of 2023, Wedbush analysts Jay McCanless and Brian Violino wrote. The brokerage has a $144 price target and a neutral rating on the stock. Shares of Lennar ( LEN ) were down 2.2% in afternoon trade.

Wedbush is expecting earnings per share to dip to $3.62 from $3.87 the year earlier, putting the brokerage below the consensus of $3.64. In line with Lennar's ( LEN ) guidance, Wedbush is modeling for a 140 basis-point decline in gross margin.

Third-quarter order growth is projected by Wedbush to increase 5.5% on an annual basis to about 20,800 units, which is in line with consensus and near the midpoint of management's 20,500 to 21,000 guidance. The homebuilder is expected to report results for the third quarter on Sept. 19 after the market closes.

While Lennar ( LEN ) doesn't usually comment much on its latest performance during its earnings conference call, the recent pullback in mortgage rates may be mentioned as a potential demand catalyst, according to McCanless and Violino. The analysts will also be looking for color on Lennar's ( LEN ) pricing power in a lower mortgage rate environment.

"Since lower mortgage rates should require a smaller rate buydown, we think there is a possibility that Lennar ( LEN ) raises the (fiscal 2024) gross margin guide," they said. Gross margin is currently expected to hold steady year over year at 23.3%. Wedbush maintained its gross margin estimates for the second half of the year.

Price: 175.73, Change: -4.50, Percent Change: -2.50