Lennar (LEN) has limited scope for near-term improvement, with risks still present and concerns about a 2027 recovery, while its updated management presentation did little to ease concerns around land-banking structures and their impact on volume, margins and free cash flow, RBC Capital Markets said.

Management highlighted a long list of demand headwinds, including high mortgage rates and stretched affordability, a re-acceleration in the consumer price index depressing consumer confidence and keeping the Fed on hold, AI-driven job security concerns and a pause in build-to-rent buying.

A decline in incentives to 12.9% from 14.1% in fiscal Q1 was a bright spot, though management did not 'bless' the sustainability of this, according to the note Friday.

RBC remains skeptical of meaningful gross margin gains, given persistent demand headwinds. Any weakness in demand could force the company to reinstate deeper incentives to protect volume, the brokerage said.

The investment firm lowered its 2026 and 2027 earnings per share estimates to $5.30 and $6.29 from $6.04 and $7.00, respectively.

RBC kept an underperform rating on Lennar and lowered the price target to $85 from $88.

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