One of the leading homebuilding companies in the U.S., KB Home (KBH - Analyst Report) recently acquired 34 acres of land in Live Oak, Texas. The company is currently investing in land development for 172 home sites in the new community of Ironwood at Crestway. The models home are expected to be opened in June.
Owing to its operational business model KBnxt, KB Home always begins construction only after a purchase agreement is executed. Therefore, consumers buying KB homes get the liberty to plan their homes according to their preference. The consumers can choose from 14 one- or two- storey floor plans for their homes in Ironwood at Crestway.
KB Home intends to open more than 120 communities in fiscal 2013, with more communities scheduled to come up in the later half of the year. As such, the community count is expected to increase by at least 15% to 20% by the end of next year. The company expects profitability for fiscal 2013.
The rising demand for new homes has led to a favorable situation in the housing market, where inventory levels are dropping and prices are moving up. As such most home building companies are constructing increased number of new homes in order to maintain the required level of inventory to meet the growing demand.
With housing market recovery gaining momentum, KB Home believes its strategic initiatives such as overhead reduction, margin expansion, and land investments in higher-priced, better-located communities; and increasing backlog will help it achieve profitability in the upcoming quarters. Though we have faith in KB Home’s strategic initiatives, we believe that it may take time to achieve sustainable profitability as the housing market recovery process is erratic and uneven.
KB Home carries a Zacks Rank #3 (Hold).
Stocks in the in the homebuilding sector that are currently performing well include NVR, Inc. (NVR - Snapshot Report) with a Zacks Rank #1 (Strong Buy). The Ryland Group, Inc. and D.R. Horton Inc. (DHI - Analyst Report) hold a Zacks Rank #2 (Buy).