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KB Home Opens Single-Family Homes Sky Ranch, Eyes Expansion

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KB Home (KBH - Free Report) recently announced the opening of single and double-story single-family home community named Sky Ranch in east Aurora, in a bid to boost community count. The community, which is located near Interstate 70 and E-470, lies in close proximity to Denver International Airport, Denver Technological Center and downtown Denver.

At Sky Ranch, the company will build 149 new homes, ranging in size from approximately 1,300 to 2,700 square feet, with 10 distinct floor plans. These new home communities will allow homebuyers to design and implement features as well as amenities of their choice. Moreover, these communities will be built per the latest ENERGY STAR guidelines and will include the WaterSense label. This is expected to result in savings of $696-$1,092 per annum in utility costs, for homebuyers, per the floor plan.

Customer-Centric Initiatives to Drive Profits

KB Home, one of the largest homebuilders in the United States, focuses on Built-to-Order process that provides buyers with a wide range of choices and a personalized customer experience through in-house community teams. This consumer-centric approach helps homebuyers to design a home with features and amenities of their choice. The approach helped KB Home to gain a competitive advantage over peers and lower the cost of production.

During first-quarter fiscal 2019, KB Home’s homebuilding segment’s revenues (accounting for 99.7% of total revenues) declined 7% the prior-year period due to lower average selling price of homes delivered. That said, the company believes that stable interest rates, stronger demand from increased consumer confidence, community growth and smaller floor plans for home buyers addressing affordability concerns will likely drive growth through 2019. Notably, its average community count at the end of the first quarter was 244, up 10% on a year-over-year basis.

The U.S. housing market started showing positive signs since the beginning of 2019, after a torrid second-half 2018. Declining mortgage rates and moderate home prices have been adding strength to KB Home and other homebuilders. Meanwhile, the overall homebuilding industry remains positive owing to ongoing traffic trends that indicate higher inclination of buyers, thereby reflecting a slow but steady housing recovery.

Stock Performance

Shares of KBH have gained 36.8%, outperforming its industry’s 28.5% rally so far this year. The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing 13 quarters.

Zacks Rank & Key Picks

Currently, KB Home carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) and Taylor Morrison Home Corporation (TMHC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVR, PulteGroup and Taylor Morrison surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 17.6%, 13.5%, and 38.7%, respectively.

Zacks' Top 10 Stocks for 2019

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