UPDATE: Credit Suisse Downgrades KB Home to Neutral, Lowers PT on Cheaper Valuation

In a report published Wednesday, Credit Suisse analyst Michael Dahl downgraded the rating on

from Outperform to Neutral, and lowered the price target from $20.00 to $16.00. In the report, Credit Suisse noted, “We are downgrading KBH to Neutral from Outperform as the cheap(er) valuation could offer potential for a modest bounce from current levels, but is not enough to offset meaningfully lower gross margin expectations, potential headwinds to sales activity in core Texas markets, and no clear path to improving either its margin or growth profile at least in the coming year. As we reset our gross margins expectations, temper our order growth ests., and incorporate a full book tax rate, our EPS est. for '15 falls to $0.80 (from $1.70 prior, or $1.07 on a fully-taxed basis) and our '16 est. drops to $0.94 (from $2.20, or a fully-taxed $1.38). We are lowering our target price to $16 from $20.” KB Home closed on Tuesday at $13.87.