Will This EPS Target Decrease Hurt KB Home (KBH) Stock Today?

NEW YORK (TheStreet) -- KB Home (KBH) stock has had its earnings estimates decreased, JMP Securities said Monday. The company decreased its 2014 EPS guidance to $1.59 from $1.64, based on management's plans to scale business and add communities to land already invested in.

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TheStreet Ratings team rates KB HOME as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate KB HOME (KBH) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • KB HOME reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KB HOME turned its bottom line around by earning $0.41 versus -$0.76 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $0.41).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 184.8% when compared to the same quarter one year prior, rising from -$12.46 million to $10.56 million.
  • KBH has underperformed the S&P 500 Index, declining 10.11% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio is very high at 3.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
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