Lennar (LEN): Strong Revenue, Sharply Weaker Cash Flow and Aggressive Buybacks Raise Questions

Opening: Revenue Holds Up but Cash Flow Slips — and Buybacks Keep Pace#

Lennar ([LEN]) closed fiscal 2024 with $35.44 billion in revenue (+3.53% YoY) while free cash flow fell sharply to $2.23 billion (-56.10% YoY), even as the company repurchased $2.26 billion of stock and returned $548.8 million in dividends. That mix — modest top‑line growth, margin compression, a halving of operating and free cash flow, and continued large share repurchases — creates a clear tension between execution and capital allocation at a time when homebuilding is still cyclical. The headline figures come from Lennar’s fiscal results (period ended 2024‑11‑30, filing date 2025‑01‑23).

Financial performance: top line steady, margins under pressure#

Lennar’s FY2024 income statement shows revenue of $35.44B, up from $34.23B in FY2023, a change of +3.53%. On the surface the top line looks resilient in a still‑uneven housing cycle, but gross profit and operating income moved in the opposite direction. Gross profit fell from $5.94B to $5.50B (‑7.41%), and operating income declined from $5.44B to $4.85B (‑10.85%), compressing gross margin to 15.52% (from 17.35%) and operating margin to 13.68% (from 15.89%). Net income finished essentially flat at $3.93B (‑0.25%).

The income‑statement movements show that costs of revenue rose faster than sales. Cost of revenue increased to $29.94B (+5.83% YoY) versus revenue growth of +3.53%, which drove the gross‑margin contraction and lower operating profit. The company’s reported gross‑profit and operating‑income ratios for FY2024 are 15.52% and 13.68%, respectively, and those ratios represent a meaningful margin reset versus the 2021–2023 period when gross margins were in the high teens to low twenties.

Table 1 below summarizes the principal income statement lines and year‑over‑year deltas (all figures in USD billions):

(Source: Lennar fiscal results, period ended 2024‑11‑30, filing date 2025‑01‑23.)

The constructive element is scale: revenue growth plus stable absolute net income shows the business remains profitable through a tough operational patch. The challenge is the rising cost base and the margin slide — a combination that turns attention to conversion of profits into cash.

Cash flow and capital allocation: conversion weakness amid aggressive returns#

The clearest inflection in the 2024 results is the cash‑flow story. Net cash provided by operating activities plunged to $2.40B in FY2024 from $5.18B in FY2023, a decline of -53.67%. Free cash flow followed the same trajectory, dropping to $2.23B from $5.08B (‑56.10%). The swing is mostly explained by a one‑year change in working capital: Lennar recorded a ‑$2.00B change in working capital in FY2024 versus a +$0.57B benefit in FY2023. That shift suggests either inventory/build‑for‑sale build, timing of payables/receivables, or other timing‑sensitive items that temporarily consumed cash during the year.

Meanwhile, management returned significant cash to shareholders. The company repurchased $2.26B of stock in FY2024 (compared with $1.18B in FY2023), an increase of +91.53% in repurchase dollars, and paid $548.82M in dividends (+27.48% YoY). The combination of falling FCF and elevated buybacks compressed the margin of safety on liquidity even though Lennar remained a net cash company on the balance sheet.

Table 2 highlights balance sheet and cash flow items (USD billions):

(Source: Lennar cash flow & balance sheet schedules, fiscal periods ended 2024‑11‑30 and 2023‑11‑30.)

The balance‑sheet picture remains healthy by traditional measures: total assets of $41.31B against total liabilities of $13.29B yields substantial shareholders’ equity of $27.87B, and net debt is negative at ‑$720.4M. That net cash position affords flexibility, but the year‑over‑year deterioration in net cash and the sharp drop in cash flow generation deserve explicit monitoring.

Reconciliations and data discrepancies: which ratios to trust?#

The dataset includes several precomputed TTM ratios that differ from simple calculations using year‑end line items; for example, a reported current ratio TTM of 9.15x contrasts with a current ratio calculated from FY2024 current assets ($29.31B) divided by current liabilities ($1.84B) = 15.93x. Similarly, the published enterprise‑value/EBITDA metric of 9.4x differs from an EV computed from the reported market cap ($36.25B) plus net debt (‑$0.72B) divided by FY2024 EBITDA ($4.97B) which produces ~7.15x.

These differences are explainable: some metrics are TTM (trailing‑twelve‑month) or use different denominators or timing (market cap at quote time versus fiscal balance sheet date), and certain ratios may incorporate other adjustments (noncontrolling interests, preferred stock, or differing EBITDA definitions). For transparency, this piece prioritizes line‑item math from the fiscal financial statements (revenues, profits, cash flows, assets and liabilities) and flags inconsistencies where they materially affect interpretation.

Profitability and efficiency: solid returns but a recent margin reset#

Based on FY2024 line items, Lennar’s net margin is 11.10% (net income $3.93B / revenue $35.44B) and its operating margin is 13.68%. Using FY2024 total stockholders’ equity of $27.87B and FY2024 net income, a simple ROE equals 14.10% (3.93 / 27.87), which is a touch higher than some TTM ROE figures reported elsewhere in the dataset. The company continues to generate attractive returns on equity and capital in absolute terms, reflecting both profitability and a conservative capital structure.

However, the recent contraction in gross and operating margins indicates margin pressure that, if sustained, would lower returns going forward. The operating levers to watch include absorption of fixed costs through higher volumes, continued cost discipline in construction and supply chain, and the pace of any incentive activity to move inventory.

Competitive positioning and strategic context#

Lennar is one of the largest U.S. homebuilders by revenue and scale, with a diversified footprint that the company uses to manage geographic cycles. Scale provides procurement and land advantages, while product mix focused on entry‑level and move‑up buyers positions Lennar in the highest‑volume segments of demand. That strategic position is consistent with the longer‑term structural shortage in U.S. housing stock and gives Lennar the potential to capture share when affordability conditions improve.

The company’s recent execution — tight inventory discipline in prior years and investments in productivity (modular construction, right‑sized floorplans) — helps explain why management continued to deploy capital into buybacks during a period of compressing cash flow. The risk is that if a further pullback in demand forces incentives to rise, margins could re‑compress and cash returns would come under pressure. Given Lennar’s scale and the structural shortage dynamic, the firm generally enjoys pricing power in normalized cycles, but the timing remains cyclical.

Earnings cadence and analyst expectations: the path to FY2025#

Analyst estimates embedded in the dataset indicate a normalized revenue profile for FY2025 around $35.25B (consensus) with earnings per share expectations pulling down versus TTM figures (FY2025 estimated EPS $8.69 vs TTM net income per share ~$12.45). Forward multiples in the dataset show some dispersion, with forward P/E estimates ranging depending on the assumed year. These projections reflect the industry’s deliberate conservatism: revenue is not expected to spike immediately despite mortgage‑rate movements, and EPS is modeled lower given margin sensitivity and timing of deliveries.

Investors should watch the company’s quarterly cadence for three leading indicators: new orders (demand), deliveries (conversion of backlog into revenue) and gross margins (pricing power and cost control). Management commentary around incentives and absorption will be key to understanding whether the FY2024 working‑capital drawdown was a one‑off timing event or evidence of slower sell‑through.

Capital allocation: returns to shareholders vs reinvestment#

Lennar’s FY2024 capital allocation mix prioritized shareholder returns — especially buybacks — while keeping a modest dividend. Share repurchases of $2.26B materially exceeded free cash flow of $2.23B, which implies that in 2024 the company funded part of buybacks with balance sheet liquidity (cash on hand) and operational levers. With net cash of roughly $720M at year end, Lennar retains flexibility, but the margin of safety narrowed in 2024.

From a capital allocation framework, two questions are central: the sustainability of repurchases if cash flow does not normalize, and the trade‑off between buybacks and reinvestment in volume expansion (land acquisition, community openings). The company reduced total debt by ~15.86% year‑over‑year, which improves financial flexibility, but the fall in cash balances and the decline in cash generation warrant a more conservative monitoring posture.

What this means for investors#

Lennar’s FY2024 results tell a double story: scale and profitability remain intact, but conversion into cash weakened materially in a single year and management continued aggressive buybacks. That combination is manageable while the balance sheet remains healthy, but it reduces optionality and increases dependency on a recovery in order activity and improved working‑capital dynamics.

If mortgage affordability improves in a sustained way, Lennar’s geographic diversification, product mix and scale provide a credible runway to restore margins, cash flow and organic growth. If demand softens or incentives rise, the company’s returns and liquidity cushion would be the first things to come under pressure. Investors should focus on sequential metrics — new orders, cancellations, incentives, backlog pricing and days‑to‑deliver — rather than headline revenue alone.

Key takeaways#

• Fiscal 2024 revenue of $35.44B represented a modest +3.53% gain, but gross and operating margins compressed meaningfully as cost of revenue rose faster than sales. (Source: FY2024 financial statements, filed 2025‑01‑23.)

• Operating cash flow fell to $2.40B (‑53.67%) and free cash flow to $2.23B (‑56.10%). The swing is explained largely by a ‑$2.00B working‑capital movement. (Source: FY2024 cash flow statement.)

• The company repurchased $2.26B of stock (up +91.53%) and paid $548.82M in dividends (+27.48%), meaning buybacks approximate FY2024 FCF and reduced net cash. (Source: FY2024 financing and cash flow schedules.)

• Balance sheet remains healthy with $4.91B cash and $4.19B total debt (net cash ≈ $720M), but net cash declined vs FY2023. Total equity rose to $27.87B. (Source: FY2024 balance sheet.)

• Calculations from year‑end line items produce a simple ROE of 14.10% for FY2024 and an EV/EBITDA (using market cap ~$36.25B) of ~7.15x, highlighting that some precomputed TTM metrics in data sources differ from straight line‑item math. Readers should be mindful of timing and definition differences when reconciling ratios. (Source: market quote and FY2024 financials.)

Conclusion#

Lennar remains a large, profitable homebuilder with the balance‑sheet capacity to navigate a multi‑year housing cycle. The FY2024 results, however, highlight a clear operational inflection: margins compressed and cash generation fell sharply even as shareholder returns accelerated. The company is still net cash and generates strong ROE in absolute terms, but the narrowing liquidity cushion means near‑term execution — turning orders into deliveries without reintroducing heavy incentives — is the principal risk/reward hinge for investors.

Watch the next quarterly reports for evidence that the working‑capital outflow reverses, that new orders are rising organically, and that gross margins are stabilizing. Those metrics will determine whether FY2024 is a temporary cadence issue or the start of a more sustained normalization in cash conversion. In the meantime, Lennar’s combination of scale and structural housing shortage support the company’s long‑term optionality, but the near‑term path to restored cash flow is the operational story that matters most.

(Reported figures and calculations are drawn from Lennar’s fiscal financial statements for the period ended 2024‑11‑30 (filed 2025‑01‑23) and the provided market quote. All ratio calculations in the text are computed from the line items cited above.)