UPDATE: Compass Point Reiterates On KB Home Following Weak 3Q14 Earnings

In a report published Thursday, Compass Point analyst Wilkes Graham reiterated a Sell rating on KB Home KBH, but lowered the price target from $15.00 to $13.50. In the report, Compass Point noted, “KBH reported weak 3Q14 earnings across the board characterized by a 13 cent headline miss, -2% closings growth (vs. consensus of 9%), 5% orders growth (vs. consensus of 13%), and a 110 bp SG&A margin miss. "Management attributed various delays around the system that tempered their closings pace during the quarter such as (1) subcontractor shortages, (2) inadequate municipal staffing among city inspectors, (3) the inability of utility companies to get new communities energized or meters installed on completed homes, and (4) the Company's transition from their preferred mortgage relationship with Nationstar to their new JV, Home Community Mortgage. "Although ASP was largely in line with the Street's consensus and AOP growth was the only metric to beat the Street with 13% yoy growth (vs. consensus of 10%), AOP growth still decelerated sequentially from 14% yoy growth in 2Q14. Until KBH can find a sustainable balance between both volumes and pricing on the lower-end of the market, we suggest investors look for upside in our Buy-rated names in front of the November Hope Trade (November 21st to February 6th).” KB Home closed on Wednesday at $16.10.