Lennar shares hit 8-year low

The catalyst Tuesday was a bearish analyst note that predicted Lennar's 2008 loss would be wider than previously anticipated.

Lennar shares fell 51 cents, or 4.1 percent, to $11.83 Tuesday. The stock traded for as little as $11.07 earlier in the session. It hasn't been that low since 2000.

Last week, the builder reported a 55 percent drop in revenue in the quarter ended May 31 and took more charges to write down the value of unsold homes. The company also did not have positive free cash flow.

It is the latter point that has Goldman Sachs analyst Chris Hussey most concerned.

"We think it is important to pay particular attention to cash flow generation and the balance sheets," Hussey said. "Our analysis suggests that (stock performance) has been predicated on balance sheet improvements as measured by net debt to capital ratios."

Most builders have been slashing prices to generate sales, and thus revenue. Instead of pumping the money into building homes that no one wants, the companies have focused on paying down debt. The idea is to be unencumbered financially when the market rebounds.

Hussey reiterated a "Sell" rating on Lennar and widened a loss estimate for the year to $2.05 per share from $1.85, based on the poor second-quarter results.