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.
Will KB Home's Growth Initiatives Offset Coronavirus Woes?
Read MoreHide Full Article
KB Home (KBH - Free Report) remains strong on the Returns-Focused Growth Plan, KB2020 business strategy and consumer-centric approach. Notably, its land acquisition and development strategy is further encouraging.
The company’s price performance is reflective of the above-mentioned positives. In a month’s time, the stock has gained 24.6% compared with the industry’s 22.8% growth and S&P 500 composite’s 16.3% rally. The company also has a Value Score of B.
However, the recent pandemic has caused significant disruptions. In response to coronavirus-induced slowdown, the company is witnessing slowdown in traffic and sales, which is in turn putting pressure on its performance. High cost is another cause of concern for this Zacks Rank #3 (Hold) company.
KB Home has been benefiting from the Returns-Focused Growth Plan — which focuses on enhancing core business strategy, improving asset efficiency and monetizing significant deferred tax assets. The strategy is set to drive homebuilding revenues, operating income margin, return on invested capital, return on equity and leverage ratio.
However, macro-economic conditions might not be in favor of the company in the near future. It announced closure of sales centers, model homes and design studios to the general public in mid-March. Also, it has suspended its fiscal 2020 guidance for now.
Nonetheless, strong financial position and measures taken to overcome the uncertainties are commendable. In first-quarter fiscal 2020, the company had $430 million in cash and more than $1.2 billion of total liquidity. Moreover, it remains confident about its liquidity position.
Built-to-Order Model Overcomes Bottom-Line Risks
KB Home’s Built-to-Order process gives it a competitive advantage over peers, leading to lower cost of production. The approach provides buyers with a wide range of choices in major aspects of their future home and personalized customer experience through in-house community teams. Notably, the process provides higher revenues from premiums (lots, plans, and elevations), as well as design studio and structural options.
In addition, its focus on core KB2020 business strategy — which aims to boost scale in the existing geographic footprint, improve profitability per unit, generate higher operating margin, drive earnings, while generating positive cash flow to redeploy for growth and debt reduction — is commendable.
However, it has been experiencing labor shortage, which is resulting in higher wages and delays in construction, eventually hurting the number of homes delivered.
Although labor costs are increasing, its customer-centric approach will definitely help it gain traction among homebuyers.
Key Picks
Some better ranked stocks in the same space are TRI Pointe Group, Inc. (TPH - Free Report) , Century Communities, Inc. (CCS - Free Report) and Toll Brothers, Inc. (TOL - Free Report) . While TRI Pointe sports a Zacks Rank #1, Century Communities and Toll Brothers carry a Zacks Rank #2 (Buy).
Both TRI Pointe and Toll Brothers' earnings growth is expected to be 11% in the long term.
Century Communities surpassed earnings estimates in three of the trailing four quarters, with the average being 17.1%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Will KB Home's Growth Initiatives Offset Coronavirus Woes?
KB Home (KBH - Free Report) remains strong on the Returns-Focused Growth Plan, KB2020 business strategy and consumer-centric approach. Notably, its land acquisition and development strategy is further encouraging.
.jpg)
The company’s price performance is reflective of the above-mentioned positives. In a month’s time, the stock has gained 24.6% compared with the industry’s 22.8% growth and S&P 500 composite’s 16.3% rally. The company also has a Value Score of B.
However, the recent pandemic has caused significant disruptions. In response to coronavirus-induced slowdown, the company is witnessing slowdown in traffic and sales, which is in turn putting pressure on its performance. High cost is another cause of concern for this Zacks Rank #3 (Hold) company.
Let’s see how this well-known homebuilder’s fundamentals will help it overcome these barriers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Business Initiatives to Mitigate COVID-19 Impact
KB Home has been benefiting from the Returns-Focused Growth Plan — which focuses on enhancing core business strategy, improving asset efficiency and monetizing significant deferred tax assets. The strategy is set to drive homebuilding revenues, operating income margin, return on invested capital, return on equity and leverage ratio.
However, macro-economic conditions might not be in favor of the company in the near future. It announced closure of sales centers, model homes and design studios to the general public in mid-March. Also, it has suspended its fiscal 2020 guidance for now.
Nonetheless, strong financial position and measures taken to overcome the uncertainties are commendable. In first-quarter fiscal 2020, the company had $430 million in cash and more than $1.2 billion of total liquidity. Moreover, it remains confident about its liquidity position.
Built-to-Order Model Overcomes Bottom-Line Risks
KB Home’s Built-to-Order process gives it a competitive advantage over peers, leading to lower cost of production. The approach provides buyers with a wide range of choices in major aspects of their future home and personalized customer experience through in-house community teams. Notably, the process provides higher revenues from premiums (lots, plans, and elevations), as well as design studio and structural options.
In addition, its focus on core KB2020 business strategy — which aims to boost scale in the existing geographic footprint, improve profitability per unit, generate higher operating margin, drive earnings, while generating positive cash flow to redeploy for growth and debt reduction — is commendable.
However, it has been experiencing labor shortage, which is resulting in higher wages and delays in construction, eventually hurting the number of homes delivered.
Although labor costs are increasing, its customer-centric approach will definitely help it gain traction among homebuyers.
Key Picks
Some better ranked stocks in the same space are TRI Pointe Group, Inc. (TPH - Free Report) , Century Communities, Inc. (CCS - Free Report) and Toll Brothers, Inc. (TOL - Free Report) . While TRI Pointe sports a Zacks Rank #1, Century Communities and Toll Brothers carry a Zacks Rank #2 (Buy).
Both TRI Pointe and Toll Brothers' earnings growth is expected to be 11% in the long term.
Century Communities surpassed earnings estimates in three of the trailing four quarters, with the average being 17.1%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>