KB Home (KBH) Stock Gains on Analyst Upgrade

NEW YORK (TheStreet) --Shares of KB Home  (KBH) are up 0.73% to $16.49 after its price target was raised to $17 from $16 at Credit Suisse, which maintained its "neutral" rating.

The firm also increased 2015 earnings estimates to $0.89 per share from $0.77, and raised 2016 earnings estimates to $1.12 from $0.94 per share.

"While margins will continue to lag peers, we think continued achievement of performance consistent with stated operating goals can help build credibility and reduce the valuation gap," analysts at Credit Suisse said.

Additionally, the firm raised revenues estimates to $3.13 billion in 2015 from $2.96 billion, and increased 2016 revenues estimates to $3.41 billion from $2.96 billion.

KB Home is a homebuilding company that constructs and sells homes through five operating divisions including four homebuilding segments and one financial services segment.

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 robust revenue growth, notable return on equity, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 28.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 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. Compared to other companies in the Household Durables industry and the overall market, KB HOME's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 77.87% to -$48.91 million when compared to the same quarter last year. In addition, KB HOME has also vastly surpassed the industry average cash flow growth rate of -79.17%.
  • KB HOME's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KB HOME increased its bottom line by earning $9.03 versus $0.41 in the prior year. For the next year, the market is expecting a contraction of 90.0% in earnings ($0.90 versus $9.03).
  • You can view the full analysis from the report here: KBH Ratings Report

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