KB Home (KBH) Stock Up as New Home Sales Reach 7 Year High

NEW YORK (TheStreet) -- Shares of KB Home (KBH) are up by 1.08% to $16.85 in late morning trading on Tuesday, as some home builder stocks gain thanks to the rise in new single family home sales for May.

On Tuesday, the Commerce Department said sales grew by 2.2% to a seasonally adjusted annual rate of 546,000 units, the highest level since February 2008, Reuters reports.

Economists polled by Reuters had forecast for a 525,000 unit pace for May.

Tuesday's figure followed data released on Monday showing home re-sales in May jumped to a five and a half year high.

KB Home is a Los Angeles-based company that focuses on constructing and selling homes. KB Home also operates a 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 revenue growth, notable return on equity and reasonable valuation levels. 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:

  • KBH's revenue growth has slightly outpaced the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 10.3%. 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.
  • KB HOME has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 ($0.91 versus $9.03).
  • The share price of KB HOME has not done very well: it is down 5.92% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: KBH Ratings Report

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