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KB Home (KBH) Boosts Community Count in Denver & Menifee

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KB Home (KBH - Free Report) announced the addition of two new residential communities — Stone Creek Ranch in Denver and Salerno in Menifee.

These affordably-priced communities will have one-story single-family and two-story single-family homes, with up to seven bedrooms and four baths. The communities start with the price tag of mid $300,000. Moreover, these communities will be built per the latest ENERGY STAR guidelines, which will help homebuyers save a reasonable amount in utility costs. With the addition of these new communities, the company now operates in 38 markets across eight states, serving a wide range of buyer groups.

The move is in line with KB Home’s ongoing brand-expansion strategy.

Focus on Community Openings Bodes Well

The company focuses on its KB2020 business strategy that aims to boost scale in existing geographic footprint, improve profitability per unit, increase operating margin, drive earnings and generate positive cash flow to redeploy growth as well as reduce debt.

To that end, KB Home is aggressively investing in land acquisition to boost community count and drive revenues. During the fiscal first, fiscal second and fiscal third quarter, the company achieved 10%, 17% and 18% increases in average community count, respectively. KB Home expects average community count to increase 10% and 12% year over year, respectively, in fiscal fourth quarter and 2019.

KB Home expects land investments to drive additional community openings throughout 2020. The company also intends to generate year-over-year growth in average community count in the mid-single digit range in fiscal 2020.

Price Performance

 

Owing to major contribution from KB Home’s businesses, shares of the company have surged 87.1% year to date compared with its Zacks Building Products - Home Builders industry’s 52.3% rally. The company’s solid performance is backed by an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing 19 quarters. Solid backlog level ($2.3 billion), declining mortgage rates, steady economic growth and favorable demographics are expected to provide a healthy backdrop for the housing industry. This will enable the company to witness further growth in fiscal 2020.

Zacks Rank & Key Picks

Currently, KB Home carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1  Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same industry are M/I Homes, Inc (MHO - Free Report) , Meritage Homes Corporation (MTH - Free Report) and PulteGroup, Inc (PHM - Free Report) , each sporting a Zacks Rank #1.

M/I Homes current-year earnings are expected to rise 31.9%.

Meritage Homes has three-five year expected earnings per share growth rate of 9%.

PulteGroup earnings surpassed estimates in all of the trailing four quarters, the average being 10.5%.

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