The Canadian investment bank said it lowered the rating of the U.S.-based homebuilding company because it is facing operational challenges and will likely struggle to increase margins.
The firm set a $17 price target on KB Home.
Watch the video below for a look at KB Home's latest quarterly results:
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 a few notable 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 revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and notable return on equity. 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:
- The revenue growth came in higher than the industry average of 5.3%. 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.
- 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 ($1.36 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Household Durables industry and the overall market, KB HOME's return on equity is below that of both the industry average and the S&P 500.
You can view the full analysis from the report here: KBH Ratings Report