NEW YORK (TheStreet) -- Shares of KB Home (KBH) are rising by 2.85% to $17.69 in early afternoon trading on Tuesday, as home builder stocks react positively to the Commerce Department's report that U.S. home construction rebounded in July, increasing 15.7%, following a 4% decline in June and a 7.4% drop in May, the Associated Press reports.
Home builder stocks are seeing a second day of gains. On Monday, shares rose after the National Association of Home Builders reported home builder confidence reached 55 points for August, showing an optimistic outlook in the industry's sales trends.
July's numbers showed strength in single-family home construction, which increased 8.3%, and apartment construction, which rose 33%, AP added.
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Separately, TheStreet Ratings team rates KB HOME as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate KB HOME (KBH) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, revenue growth, attractive valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
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. 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 ($1.35 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 995.5% when compared to the same quarter one year prior, rising from -$2.97 million to $26.62 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- In its most recent trading session, KBH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: KBH Ratings Report
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