We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Higher Revenues, Margins to Aid KB Home (KBH) Q3 Earnings
Read MoreHide Full Article
KB Home (KBH - Free Report) is scheduled to report third-quarter fiscal 2018 results on Sep 25, after the closing bell.
One of the top builders in the United States, KB Home delivered a positive earnings surprise of 16.3% in the last reported quarter. Also, the company surpassed estimates in each of the trailing four quarters, with an average positive surprise of 16.8%.
KB Home is well poised to gain traction on the current positive housing scenario. The momentum is expected to continue through the remaining of 2018, courtesy of an improving economy, modest wage growth, low unemployment levels and positive consumer confidence.
Shares of KB Home have gained 23.9% in the past year against the industry’s 0.1% decline. Meanwhile, earnings estimates for the to-be-reported quarter as well as current fiscal remained stable over the past 30 days.
Let’s delve deeper into the other factors that are expected to affect KB Home’s performance in the soon-to-be-reported quarter.
Revenues
The company’s Built-to-Order approach and Returns-Focused Growth Plan helped it deliver impressive performance so far this year. The company’s total revenues increased 8% on 3% growth in deliveries and 5% improvement in average selling price in the first six months of 2018. Notably, homebuilding operating income increased 58% in the period. The above-mentioned initiatives along with overall positive housing momentum on the back of improving economy and rising incomes are likely to help KB Home post solid third-quarter results.
The company expects housing revenues between $1.23 billion and $1.29 billion in the to-be-reported quarter (versus $1.14 billion in the year-ago quarter). This is expected to be driven by higher average selling prices and the delivery of a significant portion of the backlog. The company ended the second quarter with a backlog value of $2.24 billion, up 2.5% from the year-earlier period. This second order backlog value is expected to aid in achieving both third-quarter and full-year housing revenue expectations.
Average selling price is anticipated within $410,000-$415,000, reflecting a year-over-year increase from $ 411,400 a year ago. This anticipated increase is a result of changing mix of communities, as well as successful implementation of targeted community and plan-specific price increases.
Notably, the Zacks Consensus Estimate for third-quarter total revenues is pegged at $1.27 million, implying a 11% increase.
Margins
KB Home’s gross margin has notably improved so far this year. This has been supported by improved leverage on fixed costs from higher quarterly housing revenues, deliveries from higher-margin communities, community-specific gross margin improvement action plan, along with targeted balancing of absorption pace and pricing in communities. However, increase in land, trade labor and material costs continue to partly offset these positives.
Due to these factors, the company is expected to generate a significant increase in gross margin in the third quarter as well. It expects third-quarter housing gross margin (assuming no inventory-related charges) in the range of 17.6-18% compared with 16.9% in the year-ago quarter.
SG&A Ratio
SG&A expense ratio is expected to improve to 9.3-9.8% in the third quarter from 9.6% in the third quarter of fiscal 2017. The ratio was 10.4% in the last reported quarter, in line with the year-ago figure. The improvement reflects benefits from the ongoing cost-control initiatives and favorable leverage impact of higher housing revenues.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at 79 cents. This reflects an increase of 54.9% year over year, owing to higher revenues, increased margins and lower SG&A expenses.
Our proven model does not suggest that KB Home is likely to beat estimates in the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: The Earnings ESP for KB Home is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: KB Home has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks to Consider
Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
D.R. Horton (DHI - Free Report) has an Earnings ESP of +1.58% and a Zacks Rank #1. The company is expected to report quarterly numbers on Nov 8, 2018.
The company is expected to report quarterly results on Oct 23, 2018.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report quarterly numbers on Oct 17, 2018.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Higher Revenues, Margins to Aid KB Home (KBH) Q3 Earnings
KB Home (KBH - Free Report) is scheduled to report third-quarter fiscal 2018 results on Sep 25, after the closing bell.
One of the top builders in the United States, KB Home delivered a positive earnings surprise of 16.3% in the last reported quarter. Also, the company surpassed estimates in each of the trailing four quarters, with an average positive surprise of 16.8%.
KB Home is well poised to gain traction on the current positive housing scenario. The momentum is expected to continue through the remaining of 2018, courtesy of an improving economy, modest wage growth, low unemployment levels and positive consumer confidence.
Shares of KB Home have gained 23.9% in the past year against the industry’s 0.1% decline. Meanwhile, earnings estimates for the to-be-reported quarter as well as current fiscal remained stable over the past 30 days.
Let’s delve deeper into the other factors that are expected to affect KB Home’s performance in the soon-to-be-reported quarter.
Revenues
The company’s Built-to-Order approach and Returns-Focused Growth Plan helped it deliver impressive performance so far this year. The company’s total revenues increased 8% on 3% growth in deliveries and 5% improvement in average selling price in the first six months of 2018. Notably, homebuilding operating income increased 58% in the period. The above-mentioned initiatives along with overall positive housing momentum on the back of improving economy and rising incomes are likely to help KB Home post solid third-quarter results.
The company expects housing revenues between $1.23 billion and $1.29 billion in the to-be-reported quarter (versus $1.14 billion in the year-ago quarter). This is expected to be driven by higher average selling prices and the delivery of a significant portion of the backlog. The company ended the second quarter with a backlog value of $2.24 billion, up 2.5% from the year-earlier period. This second order backlog value is expected to aid in achieving both third-quarter and full-year housing revenue expectations.
Average selling price is anticipated within $410,000-$415,000, reflecting a year-over-year increase from $ 411,400 a year ago. This anticipated increase is a result of changing mix of communities, as well as successful implementation of targeted community and plan-specific price increases.
Notably, the Zacks Consensus Estimate for third-quarter total revenues is pegged at $1.27 million, implying a 11% increase.
Margins
KB Home’s gross margin has notably improved so far this year. This has been supported by improved leverage on fixed costs from higher quarterly housing revenues, deliveries from higher-margin communities, community-specific gross margin improvement action plan, along with targeted balancing of absorption pace and pricing in communities. However, increase in land, trade labor and material costs continue to partly offset these positives.
Due to these factors, the company is expected to generate a significant increase in gross margin in the third quarter as well. It expects third-quarter housing gross margin (assuming no inventory-related charges) in the range of 17.6-18% compared with 16.9% in the year-ago quarter.
SG&A Ratio
SG&A expense ratio is expected to improve to 9.3-9.8% in the third quarter from 9.6% in the third quarter of fiscal 2017. The ratio was 10.4% in the last reported quarter, in line with the year-ago figure. The improvement reflects benefits from the ongoing cost-control initiatives and favorable leverage impact of higher housing revenues.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at 79 cents. This reflects an increase of 54.9% year over year, owing to higher revenues, increased margins and lower SG&A expenses.
KB Home Price and EPS Surprise
KB Home Price and EPS Surprise | KB Home Quote
What Our Model Indicates
Our proven model does not suggest that KB Home is likely to beat estimates in the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: The Earnings ESP for KB Home is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: KB Home has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks to Consider
Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.
D.R. Horton (DHI - Free Report) has an Earnings ESP of +1.58% and a Zacks Rank #1. The company is expected to report quarterly numbers on Nov 8, 2018.
PulteGroup, Inc. (PHM - Free Report) has an Earnings ESP of +7.79% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is expected to report quarterly results on Oct 23, 2018.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report quarterly numbers on Oct 17, 2018.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>