S&P Global Ratings on Friday adjusted its outlook for Lennar Corp. from positive to stable but left the companys BBB issuer credit rating unchanged. The ratings firm said the outlook revision reflects deteriorating revenue and narrower gross margins as Lennar works through a cyclical slowdown associated with affordability constraints and higher mortgage rates.
For the six-month period ending May 31, 2026, Lennars core homebuilding business reported revenue of $13.9 billion, down 8% from $15.0 billion in the comparable period a year earlier. The decline in top-line sales was driven in part by a 6% drop in the average sales price, which fell to $371,000. Over the same six-month span, Lennars homebuilding gross profit margin contracted to roughly 15.4% from 18.2% in the six months ended May 31, 2025.
S&P Global identified Lennars failure to restore gross margins above the 20% level as a key factor prompting the outlook change. The ratings agency said margins remain pressured by the current market environment, and it expects the companys EBITDA margins to settle in the 7% to 8% range in 2026 before gradually moving toward about 9% in 2027 and 2028 as conditions stabilize.
The ratings report also highlighted recent credit metrics. As of May 2026, Lennar had debt to EBITDA of 1.7x, FFO to debt of roughly 29% and EBITDA interest coverage of 11.6x. S&P linked the downward movement in those ratios to Lennars decision to defend delivery volumes, which fell by a modest 2% to 37,382 homes in the first half of fiscal 2026 amid weak consumer sentiment.
S&P Global said the stable outlook assumes Lennar will preserve a set of credit metrics over the next 24 months: adjusted debt to EBITDA of less than 2x, FFO to debt in the 45% to 50% range, EBITDA interest coverage between 8x and 12x, and debt to capital of below 20%. The firm noted that, although leverage has increased — net debt to EBITDA rose to 1.7x as of May 2026 from 0.9x as of Nov. 30, 2025 — the companys leverage remains within the range acceptable for the current rating.
S&P warned it could lower Lennars rating if leverage moves materially and persistently above the 2x threshold. Such a deterioration could follow continued operating underperformance that results in 2027 gross margins falling by more than 200 basis points relative to current forecasts, or if the company pursues a more aggressive financial policy. The ratings agency also pointed to Lennars $4.7 billion liquidity position as a supporting element of its credit profile.
The ratings action and commentary underscore S&P Globals view that Lennar will face near-term margin pressure while navigating a cyclical downturn in the housing market driven by affordability and mortgage cost headwinds. The stable outlook indicates S&P believes the company can manage through the period without breaching the firms leverage and coverage thresholds that support the BBB rating, provided operating and financial discipline is maintained.