Lennar (LEN, LEN.B) is expected to miss earnings estimates for fiscal Q3, with EPS projected at $2.04 versus the Street's estimate of $2.12 amid weaker demand and higher incentives, Oppenheimer said in a note Wednesday.

Q4 guidance may be stronger, as the company could benefit from lower mortgage rates and better cost leverage, but recent stock gains suggest the market may have already priced this in, the investment firm said.

Leverage remains a concern, with adjusted debt levels significantly higher when accounting for land bank obligations, Oppenheimer said.

Adjusted debt-to-capital stands at 72%, the highest in the sector, it added.

A future margin hit is expected in fiscal 2026 due to the MRP land transaction, which could lower gross margins by about 80 basis points and raised Lennar's costs as the company fully expenses these land deals, according to the note.

Return on equity is likely to stay below peers, with fiscal 2025 ROE projected at just 10%, while achieving the long-term average ROE would require a 50% increase in turnover, which seems unlikely, Oppenheimer analysts noted.

Oppenheimer maintained a perform rating for Lennar.

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