D.R. Horton (DHI), KB Home (KBH) and Lennar (LEN) face a balanced risk-reward at current valuations, BofA Securities said in a Friday preview, projecting another round of downward estimate revisions across the homebuilding sector.

The firm cut its 2025 and 2026 earnings per share estimates for the group by 3% and 6% on average, citing slower sales, elevated incentives, and continued land cost pressures. BofA is now 5% and 4% below consensus for those years, respectively.

Private builder checks indicated soft second-quarter demand, increased cancellations, and heavier discounting in key markets like Dallas and Virginia. Margin headwinds are likely to persist in the second half of 2025 as affordability remains stretched and incentives continue, according to the note.

BofA maintained neutral ratings on D.R. Horton, KB Home, and Lennar, while raising its price objective to reflect higher sector multiples. The new price target for D.R. Horton is $135, up from $125; for KB Home, $60 from $54; and for Lennar, $115 from $105.

The firm said it raised its 2025 EPS estimate on D.R. Horton by 1% and its price objective by 8% due to improved sector multiples.

For KB Home, the new price target is based on 1.0 times price to 12-month forward book value, a premium to its historical average because of a stronger return-on-equity profile.

BofA said its Lennar target is based on 1.5 times price to 12-month forward tangible book value, in line with historical averages given its average return on tangible equity.

Price: 130.60, Change: -1.05, Percent Change: -0.80