Back to top

Image: Bigstock

5 Reasons to Add KB Home (KBH) to Your Portfolio Now

Read MoreHide Full Article

Los Angeles, CA-based KB Home (KBH - Free Report) is a well-known homebuilder in the United States and one of the largest in the country.

The company entered 2017 with an impressive 20.7% growth in revenues and a double-digit rise in deliveries and housing revenues in the first quarter. Strong orders in value (up 32%) and backlog (up 25%) bode well for the company.

Housing/homebuilding industry has been riding high lately on solid new home sales data, affordable interest/mortgage rates and impressive housing starts figure. Considering the positive momentum, homebuilding stocks like NVR, Inc. (NVR - Free Report) , PulteGroup Inc. (PHM - Free Report) , Lennar Corp. (LEN - Free Report) , KB Home are riding high these days.

What Makes the Stock an Attractive Pick?

Stock Price Movement: KB Home’s shares has advanced 25.8% year to date, outperforming the Zacks categorized Building-Residential/Commercial industry’s gain of 17.9%. Moreover, this Building-Residential/Commercial industry falls within the top 17% of the Zacks Industry Rank supporting growth potential. Going forward, compelling 2017 outlook for the U.S. homebuilding industry due to affordable interest rates, tight inventory, an improving economy, modest wage growth, low unemployment levels and positive consumer confidence, should drive the stock’s performance in the upcoming quarters.



Estimate Revisions: In the last 60 days, the Zacks Consensus Estimate for KB Home moved north by 3.9% to $1.60 per share for 2017 and 6% to $1.93 per share. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the stock’s Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, KB Home beat earnings estimates in the last four quarters, the average being 7.30%.

Earnings & Revenue Growth: KB Home’s earnings are expected to register 58.1% growth in the current quarter and 42.4% in 2017 on 13.4% higher revenue in the quarter and 18.1% for the year, respectively.

Moreover, KB Home has a solid 3–5 year earnings per share growth rate of approximately 15.7%.

Solid VGM Score: The company flaunts an impressive VGM Score of “A”. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 (Buy) make solid investment choices.

Solid Housing Fundamental: Core housing fundamental metrics are touching new highs in recent times, thanks to a healthy job market and uptick in finances that helped buyers the wherewithal to make purchases. The latest Commerce Department report revealed that construction spending rose at a seasonally adjusted 0.8% to $1,192.8 billion in February, the highest since Apr 2006. Although it lagged expectations of a 1% gain, the start to the year turned out to be stronger than expected.

The uptick in mortgage rates seems to be having minimal effect on new home sales as well. In February, new home sales surged to a seven-month high, indicating the gradual housing market recovery on strong demand. The upside was primarily attributable to unseasonably warm weather across a large part of the country despite lean inventories of homes for sale as well as slightly higher mortgage rates.

Hence, the 2017 outlook for the U.S. homebuilding industry is quite compelling and adding the stock to your portfolio should not be a disappointment.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>

Published in