A Buffett portfolio company missed earnings expectations. Its shares fell

Warren Buffett's Berkshire Hathaway's portfolio company, real estate developer Lennar, missed earnings expectations for the fourth quarter of 2025, adding to investor concerns about the health of the entire U.S. housing sector. Amid the report, Lennar shares lost more than 5% on the premarket.

Lennar, one of the largest housing developers in the U.S., missed earnings expectations for the fourth quarter of 2025 and provided a weak outlook for the first quarter of 2026. This is not a positive signal for the entire development sector, Barron's notes.

In the report, Lennar stated, in part:

- On earnings of $1.93 per share on revenue of $9.4 billion for the fourth quarter of 2025. Analysts, according to FactSet, were expecting to see Lennar's earnings for that time period at $2.21 per share.

- For the full year, Lennar reported earnings of $7.98 per share, or $8.06 per share on an unadjusted basis, on revenue of $34.2 billion.

After the report was published, Lennar's securities fell 5.5% on the premarket on Dec. 17. Since the beginning of the year, the company's Class A shares have fallen about 9%, the worst result since 2022, Barron's notes.

These are challenging times for companies in the housing sector as home buying costs remain high and sales have slowed, Barron's points out. "Although interest rates declined slightly in our fourth quarter, the overall market remained challenging," Lennar co-CEO Stuart Miller said in a press release.

He says the company continued to offer incentives and price adjustments to customers in the last reported quarter, while focusing on sales volume. Construction companies that use such incentives, Barron's notes, do so at the cost of lowering their margins. Lennar's margin on home sales in the fourth quarter was 17%, below analysts' expectations of 17.5%, the publication notes.

The company forecasts that in the first quarter of 2026, the number of new orders in its portfolio will be between 18,000 and 19,000 and contracts for deliveries will be between 17,000 and 18,000, which was also below analysts' estimates, who expected 19,911 new orders and 20,089 deliveries, Barron's notes. Lennar's projected home sales margin of 15-16% was also below the consensus forecast of 16.9%.

Investors who expected to see signs of imminent improvement in the developer's outlook found none, the publication said. That said, Lennar remains one of the companies in the sector that has been outspoken about using incentives and rebates to support sales. Lennar has previously called the use of its margins a "shock absorber" in a difficult market.

The company's prepared remarks on the report also said it will continue to offer promotions and discounts to stimulate sales. "Our strategy remains unchanged and clear: to maintain sales volume, adapt to changing conditions, reduce costs and keep housing affordable," Miller said.

Lennar shares are among the securities in which Warren Buffett's Berkshire Hathaway invests. Thus, in its Q3 2025 report, Berkshire Hathaway reported that it had increased its stake in Lennar - to about 7.232 million shares with a total value of about $910 million.

This article was AI-translated and verified by a human editor