For Immediate Release
Chicago, IL – January 18, 2022 – Zacks Equity Research Shares KB Home (
KBH Quick Quote KBH - Free Report) of as the Bull of the Day, Magna International ( MGA Quick Quote MGA - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onJ.B. Hunt Transport Services ( JBHT Quick Quote JBHT - Free Report) , Expeditors International of Washington ( EXPD Quick Quote EXPD - Free Report) and ArcBest Corp. ( ARCB Quick Quote ARCB - Free Report) . Here is a synopsis of all five stocks: KB Home continues to see strong demand for new homes and is able to navigate supply chain challenges heading into 2022. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by another 49% this year.
KB Home is one of the largest homebuilders in the country with homes in 47 markets from coast-to-coast.
Another Earnings Beat in the Fourth Quarter of 2021
On Jan 12, KB Home reported its fourth quarter 2021 results and blew by the Zacks Consensus Estimate by $0.14.
Earnings were $1.91 versus the Zacks Consensus Estimate of $1.77. It was the 6th earnings meet or beat in a row.
But KB Home has a great track record of beating, with just one miss in the last 5 years and it was when the pandemic first broke out, which sent the home building industry into an initial spiral.
That initial hit on business quickly faded as demand returned with buyers even buying remotely after touring homes online. It has been red hot ever since.
Revenue in the fourth quarter was up 40% to $1.68 billion as homes delivered jumped 28% to 3,679.
KB Home continued to have pricing power as demand remained strong with average selling price increasing 9% to $451,100.
Gross profit margin increased 230 basis points to 22.3%. Excluding inventory-related charges, the housing gross profit margin improved to 22.4% from 21%.
The improvement in gross profit margin was achieved through a favorable pricing environment due to strong demand and the limited supply of available homes for sale, and lower relative amortization of previously capitalized interest, partly offset by higher construction costs, particularly elevated lumber prices.
Ending backlog value jumped 67% to $4.95 billion as supply chain issues for things like garage doors and appliances have increased delivery times.
It was KB Home's highest fourth quarter backlog level since 2005. Each of the company's four regions generated increases which ranged from 53% in the West Coast to 106% in the red hot Southeast.
Total homes in the backlog rose 35% to 10,544.
For the year, revenue rose 37% to $5.72 billion as Americans moved during the pandemic and many wanted new homes.
Bullish on 2022
Despite Wall Street believing the demand for homes is "over" after a blistering 2-year period, KB Home said on its conference call that it believes demand will be strong again in 2022, as existing home inventory remains low and Millennials, the largest generation in American history, continues to buy homes.
KB Home's 2022 guidance was bullish.
It's looking for another big jump in revenue, in the range of $7.2 billion to $7.6 billion as the average selling price continues to move higher, in the range of $480,000 to $490,000.
KB Home said on the conference call that it wasn't worried about higher mortgage rates dampening demand.
Even with inflationary pressures and lumber prices on the move higher again, housing gross profit margin is expected in the range of 25.4% to 26.2% for the year.
Analysts Raise Earnings Estimates for F2022 and F2023
The analysts were equally as bullish as 3 estimates were raised for fiscal 2022 and one for fiscal 2023 since the earnings report.
The fiscal 2022 Zacks Consensus Estimate jumped to $9.03 from $7.88 in the last week. That's earnings growth of 49.3% as KB Home made $6.05 last year.
Fiscal 2023 also jumped to $11.04 from $8.87 over the last 7 days. That's further earnings growth of 22.2%.
Shares are Dirt Cheap
Shares of KB Home jumped 19.4% in the last week on the earnings report and are up 37.1% over the last year.
However, they haven't yet taken out the spring 2021 highs.
Over the last 2-years, shares of KB Home have lagged the S&P 500, with KBH gaining 33.2% versus the S&P 500's gain of 57.7% during that time.
They remain dirt cheap with a forward P/E of just 5.4.
And with the expected earnings growth, KB Home has a PEG ratio of just 0.3.
Shareholders also get a dividend, currently yielding 1.2%.
Why Aren't the Shares Soaring?
The Street is worried about rising rates and "peak" earnings. Over the last year, they've been wrong.
For investors looking for a value stock with rising earnings estimates, KB Home is one to keep on the short list.
Magna International is still facing pressures from the semiconductor shortage. However, this Zacks Rank #5 (Strong Sell) is still expected to see earnings growth in 2022.
Magna is a global automotive supplier with 347 manufacturing facilities and 90 product development, engineering and sales centers in 28 countries.
Headquartered in Ontario, Canada, it has 154,000 employees and considers itself a mobility technology company as its involved with all aspects of the vehicle.
Semiconductor Shortage Still the Big Issue
On Sep 30, 2021, Magna reported its third quarter results and the semiconductor chip shortage was front and center.
Magna called it a "challenged" operating environment in its press release.
"As a result of semiconductor chip shortages, our customers' production schedules were unpredictable, causing labour and other operational inefficiencies at our facilities," Magna said in the third quarter press release.
"Semiconductor chip shortages and related production disruptions are expected to continue into 2022, and the negative impacts continue to exceed our expectations from earlier this year. Our results were also negatively impacted by inflationary cost increases in production inputs including freight, labour and commodities," the company said.
Estimates Cut for 2022
Given the ongoing semiconductor shortage, the analysts have gotten bearish on 2022.
1 estimate was cut in the last month for 2022 which is likely why the Rank has fallen to a Strong Sell.
The 2022 Zacks Consensus Estimate has fallen to $7.00 from $8.40 in the last 90 days, reflecting the bearishness.
This is still earnings growth of 47.7%, however, as Magna is expected to earn $4.74 in 2021.
The auto market is strong but the entire industry is facing the same challenges.
Shares are Cheap
Magna shares are up 22.1% over the last year but it's been a rocky ride.
Shares have gained 14.8% in the last month as some bargain hunters have jumped in.
It's still cheap, with a forward P/E of 12.7.
It pays a dividend, currently yielding 1.9%.
For investors waiting to see if those earnings estimates will turn around once the semiconductor shortage eases, Magna is reporting its fourth quarter and end of the year 2021 results and will give its 2022 outlook on Feb 11, 2022.
Magna is one to keep on the short list for changes in the earnings estimates and the Zacks Rank.
Additional content: J.B. Hunt-Waymo Ink Deal to Fully Automate Trucks J.B. Hunt Transport Servicesannounced a long-term collaboration with autonomous driving technology developer, Waymo, as it aims to deploy fully autonomous trucking operations in Texas over the next few years. The move is prudent, given the persistent scarcity of drivers in the trucking industry.
This multi-year agreement extends J.B. Hunt’s relationship with Waymo. Back in June 2021, the two companies collaborated to test run autonomous freight transportation between Houston and Fort Worth in Texas. The test run was conducted on Waymo’s autonomous Class 8 trucking unit, Waymo Via, utilizing Level 4 autonomous driving technology.
J.B. Hunt’s chief sustainability officer and executive vice president, Craig Harper, said, "Our pilot last year with Waymo Via really helped us get a hands-on understanding of how autonomous driving technology could be implemented within our operations."
Through the expanded partnership, J.B. Hunt intends to conduct multiple pilot programs to access the operational capacity of Waymo Via in addressing customer needs. The deal would make Waymo Via accessible through J.B. Hunt’s digital marketplace, J.B. Hunt 360.
Zacks Rank & Other Key Picks
J.B. Hunt carries a Zacks Rank #2 (Buy). Some other stocks within the broader
Transportation sector that investors should consider are as follows: Expeditors International of Washington carries a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history. Its earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 29.1%. You can see . the complete list of today’s Zacks #1 Rank stocks here
Shares of Expeditors have appreciated more than 30% in a year.
ArcBest Corp. carries a Zacks Rank #2 (Buy). The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 27.4%.
Shares of ArcBest have surged more than 91% in a year.
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