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Can KB Home (KBH) Maintain the Sales Momentum in 2016?

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On Mar 29, 2016, we issued an updated research report on KB HomeKBH .

On Mar 23, this Los Angeles, CA-based homebuilder reported impressive results for the first quarter of 2016, marked by better-than-expected revenues. Revenues were driven by strong housing demand and solid traffic. As a result, shares of this homebuilding company were up over 5% since the earnings release.

KB Home's adjusted earnings of 14 cents per share in the first quarter of 2016 beat the Zacks Consensus Estimate by 27.3% and increased 100% year over year. Revenues of $678.4 million beat the estimate by 7.2% and rose 17% on the back of double-digit growth in the number of homes delivered and a higher-than-expected increase in average selling prices of homes. Revenues also surpassed the company's expectations.

KB Home benefited from strong backlogs in the previous quarters and broke the previous trend of soft revenues in the past few quarters. Order trends remained strong. The company also reported an increase in gross margin and improved SG&A ratio.

This Zacks Rank #2 (Buy) company experienced solid traffic levels and encouraging demand trends in the early spring selling season. Going forward, management expects this trend to continue in the upcoming quarters of 2016.

Nevertheless, labor shortages and rising cost of raw materials remains a major overhang. Also, weak demand conditions in Texas do not bode well for the company's top line.

Other Stocks to Consider

Investors interested in the construction sector may consider Hovnanian Enterprises Inc. HOV , UCP, Inc. UCP and PulteGroup, Inc. PHM . All three companies have a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

UCP INC (UCP): Free Stock Analysis Report

PULTE GROUP ONC (PHM): Free Stock Analysis Report

KB HOME (KBH): Free Stock Analysis Report

HOVNANIAN ENTRP (HOV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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