Lennar Hammers Away at Housing Hopes

Updated from 10:08 a.m. EDT

Lennar(LEN) offered its most negative view yet about the U.S. housing market Tuesday, signaling that the market could get even worse than investors expect.

The possibility that the market still has further to fall, coupled with the fact that the recent rally in builder stocks may have simply been due to a dropping 10-year note yield, means there could still be more pain in store for homebuilders' shares.

Lennar, noting "it is not clear that the homebuilding downturn has yet found a floor," said it now expects a fourth-quarter profit of $1 to $1.30 a share, well below the $1.60 mean analyst estimate. For the third quarter, Lennar posted earnings of $1.30 a share, matching the midpoint of its reduced targets released earlier this month.

"The U.S. housing market has continued to deteriorate, trailing down further and faster than anticipated," said CEO Stuart Miller. "Under these difficult conditions, we remain focused on our strategy of carefully managing inventory, reducing construction costs and overhead, methodically tapering back production and emphasizing cash generation. We have limited our land purchases and reduced standing inventory through strategic asset management."

On the company's earnings call, Miller said August was the worst month yet of the housing downturn and added that things haven't gotten any better since. He also refused to rule out the possibility of the company posting quarterly losses at some point next year.

One staggering figure from the earnings call: Lennar currently has 22,000 homes under construction, but only half of those have been sold.