KB Home ( KBH ) will announce its fourth-quarter numbers after the market close on January 10, with the consensus calling for earnings of $0.77 per share. The company earned $0.40 during the same period last year, and the stock has appreciated 36.9% since the end of June.
KBH was recently trading at $32.82, down $1.29 from its 12-month high and $17.31 above its 12-month low. Overall technical indicators for KBH are bullish with a strong upward trend. The stock has recent support above $31.25 and recent resistance below $34.00. Of the 14 analysts who cover the stock, nine rate it a "hold", one rates it a "sell", and four rate it a "strong sell". KBH gets a score of 68 from InvestorsObserver's Stock Score Report.
KBH was a top performer in 2017, with shares more than doubling. The stock gained 104% during the year, and continues to trend higher. Even with the massive gains, the valuation remains OK, with a P/E of 23.7, and earnings expected to rise near 30% during the current year. Over the next five years, analysts expect the company to grow earnings by 24.9% per annum, so conditions remain favorable for more gains moving forward. The company has posted positive earnings surprises the last seven quarters, and the street expects another earnings beat for the most recent quarter, with a whisper number of $0.80 versus the consensus $0.77. The housing market remains solid, and all the homebuilders should build on recent gains while inventory levels remain low and home prices remain high. Analysts have an average price target of $23.27 on the stock, which is well below its current price, so KBH could run into some resistance unless analysts start to ratchet their targets higher. Another strong earnings beat should result in some price target increases which would allow the stock to continue trending higher with the overall sector.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider a February 24/29 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (55.5% annualized*) and the stock would have to fall 10.7% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider a February 35/39 bear-call credit spread for a $0.60 credit. That's a potential 17.6% return (153.4% annualized*) and the stock would have to rise 8.5% to cause a problem.
Covered Call Trade
Originally published on InvestorsObserver.com