Homebuilders have had a strong run in 2019, rising about 50% as a group, and the good times are set to continue, according to a bullish note from Raymond James.
"We are making a preemptive move to upgrade three homebuilders (KBH, LEN, TOL) ahead of upcoming earnings announcements that we believe will reveal decidedly improved housing fundamentals and potential upside to current consensus FY20 estimates," said analyst Buck Horne.
KB Home was rising 1.75% to $32.03 on the upgrade to outperform, while Lennar was flat at $55.20 and Toll Brothers rose 0.18% to $39.78.
KB Home is scheduled to report earnings after the closing bell Wednesday.
"In our view, the August data demonstrated a decided (and perhaps under-appreciated) inflection in supply and pricing conditions, revealing a far more bullish backdrop for homebuilders into year-end," Horne said.
The firm cited falling mortgage rates and slowing growth in home prices as catalysts for the industry.