Today is shaping up negative for KB Home (NYSE:KBH) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the most recent consensus for KB Home from its 15 analysts is for revenues of US$6.9b in 2023 which, if met, would be a meaningful 10% increase on its sales over the past 12 months. Statutory earnings per share are presumed to step up 10% to US$8.43. Prior to this update, the analysts had been forecasting revenues of US$7.7b and earnings per share (EPS) of US$9.47 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that KB Home's rate of growth is expected to accelerate meaningfully, with the forecast 8.0% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 6.2% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect KB Home to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After a cut like that, investors could be forgiven for thinking analysts are a lot more bearish on KB Home, and a few readers might choose to steer clear of the stock.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with KB Home's financials, such as concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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