Homebuilder stocks didn't go out with the bang investors hoped for in 2015.
Owing to weaker-than-expected home sales and tepid housing starts in the last two months of the year, the group instead fizzled, sending the SPDR S&P Homebuilder ETF (XHB) down 7% and 5% in the respective three-month and six-month periods to close out the year.
While the ETF did end 2015 with a modest gain of 0.76%, which beat the 2% decline in the S&P 500 (SPX) index, the prospect of rising interest rates makes it tough to bet on homebuilders in 2016.
Shares of KB Home (KBH) , -- down 14% and 28% in the past three and six months, respectively -- seem attractive today at a forward P/E of nine, compared to the S&P 500 index's forward P/E of 17. But the company's profit margins don't suggest that its earnings growth for fiscal 2016 will reach a level to make KBH stock worth buying today, especially with the prospect of higher interest rates pressuring homebuyers.
Headquartered in Los Angeles, KB Home reports fourth-quarter fiscal year 2015 earnings Thursday before the opening bell. For the quarter that ended in November, analysts on average expect KB Home to earn 50 cents a share on revenue of $1.07 billion, compared to the year ago period when it earned 28 cents a share on revenue of $796 million. For the full year, earnings are projected to be 90 cents a share, down 4%, while full-year revenue of $3.11 billion would mark a year-over-year increase of about 30%.