Market Overview

KB Home Drops: Is the Housing Rebound Losing Momentum?

KB Home (NYSE: KBH) shares dropped on Thursday, falling nearly seven percent, despite the company's better than expected earnings report.

KB Home posted earnings per share of $0.10, which initially appeared to beat a $0.06 consensus analyst estimate, but was likely not comparable as the company took in a $5.3 million tax benefit.

Likewise, revenue also beat expectations at $578.2 million, more than the $562.9 million that was expected.

KB Home gave no specific new guidance, but said it was “well positioned” to be profitable in 2013. The company said its fourth quarter cancellation rate was 35 percent of its gross orders.

Shares were down even though economic data released on Thursday appeared to support home sales. Data on existing home sales in the U.S. came in at 5.04 million, more than the 4.87 million that was expected; the U.S. housing price index came in 0.5 percent, more than the 0.2 percent that economists forecast.

Competitors Toll Brothers (NYSE: TOL) and Lennar (NYSE: LEN) gapped down at the open on Thursday, but rebounded after the release of positive housing data.

Despite the drop on Thursday, shares of KB Home are up well over 130 percent year-to-date. Overall, the housing rebound has been one of the largest secular stock trends of 2012 as the U.S. housing market appears to be in recovery.

In a note released following the earnings report, analysts at JPMorgan reiterated their bullish stance on housing.

JP Morgan commented, “We reiterate our positive sector stance, based our outlook for housing industry fundamentals to continue to improve over at least the next 18 months, and still reasonable valuations, in our view.”

Shares of KB Home traded at $15.77 on Thursday.

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