KB Home’s 1Q Profit Beats Estimates On Housing Market Boom; Shares Tank 3%

KB Home, a homebuilding company, posted better-than-expected fiscal 1Q (ended Feb. 28) earnings, driven by a substantial increase in net orders on the strong housing market and margin expansion. Meanwhile, revenues for the quarter missed analysts’ expectations. Shares declined almost 3% in Wednesday’s extended trading session.

KB Home’s (KBH) 1Q earnings jumped 62% to $1.02 per share, compared to $0.63 reported in the prior-year period, and beat analysts’ expectations of $0.92. Revenues of $1.14 billion missed the Street’s estimates of $1.21 billion but advanced 6% from the year-ago period.

Homes delivered by the company in the quarter increased 4% year-over-year to 2,864. KB Home recorded the highest first-quarter level of net orders in 14 years, which grew 23% to 4,292. Additionally, net order value came in at $1.87 billion, up 35%. Adjusted gross margin surged 290 basis points to 24%. (See KB Home stock analysis on TipRanks)

KB Home CEO Jeffrey Mezger said, “With our full year coming into better view, supported by a 74% year-over-year increase in our backlog value and our ability to match housing starts to net orders, we believe we are now even better positioned for meaningful growth in 2021.”

On March 16, Wolfe Research analyst Truman Patterson initiated coverage of the stock with a Buy rating.

Patterson initiated coverage of 11 homebuilders and one land developer with a Buy rating based on a “constructive” multi-year industry outlook and “robust” demand expectations over the next couple of quarters.

KB Home shares have exploded almost 123% over the past year, while the stock still scores a Strong Buy consensus rating based on 6 Buys versus 2 Holds. That’s alongside an average analyst price target of $47.14, which implies 8.6% upside potential from current levels.

On top of this, KB Home scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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