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KB Home (KBH) Boosts Community Count With Single-Story Homes

KB HomeKBH announced the opening of Autumn Winds, a single-story new home, in Winchester. The company will build 141 homes in total, with five distinct floor plans featuring spacious rooms, greater storage and separate laundry rooms.

The homes at Autumn Winds will certainly be desirable as the same will be built per the latest ENERGY STAR guidelines and include WaterSense. Additionally, the energy- and water-saving features will allow homebuyers to save approximately $1,524-$1,932 a year.

The community will fascinate homebuyers since it will be convenient for commuters to travel throughout the Inland Empire as it is located near Loma Linda Medical Center-Murrieta, Mt. San Jacinto College and Menifee Countryside Marketplace. Also, the homebuyers will be given an opportunity to personalize their new home according to budget, style and preferences.

Community Count to Drive Top Line

KB Home is a highly consumer-centric company that focuses mainly on Built-to-Order approach, which provides buyers a wide range of choices regarding major aspects of their future home. Also, its low-cost production approach has given it a competitive advantage over peers.

During the third quarter of 2018, revenues in the homebuilding segment increased 7.1% from the prior-year quarter. Notably, the company's net orders per community increased 11% in the third quarter to 4.1 per month, reflecting growth in each of its four regions, namely West Coast (comprising California), Southwest (including Arizona and Nevada), Central (constituting Colorado and Texas) and Southeast (comprise of Florida, Maryland, North Carolina and Virginia).

Moreover, KB Home is aggressively investing in land acquisition in order to boost its community count for driving revenues. The company anticipates healthy community count growth in each quarter of 2019, with considerably higher planned openings in the first half of 2019 than the year-ago quarter.

However, higher construction and labor costs, as well as rising interest rate are threatening margins, as they limit homebuilders' pricing power. Also, land prices are increasing due to limited availability. Moreover, the recently imposed tariff on imported steel and aluminum has been impacting the company's performance.

Shares of this Zacks Rank #3 (Hold) company have declined 26.3% in the past six months, underperforming its industry 's decline of 21%. Earnings estimates for 2018 and 2019 have also been trending downward over the past 30 days. Although its shares are declining, its Built-to-Order approach and aggressive land acquisition strategy is likely to gain investors' confidence.

Stocks to Consider

Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corporation GLDD , Altair Engineering Inc. ALTR and EMCOR Group, Inc. EME . While Great Lakes currently sports a Zacks Rank #1 (Strong Buy), Altair Engineering and EMCOR both carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Great Lakes, Altair Engineering and EMCOR's 2018 earnings are expected to increase 111%, 23.1% and 20%, respectively.

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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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