KB Home Raised Guidance, KBW Analysts Raised Their Price Target

KB Home KBH reported its second quarter results on Tuesday. EPS of $0.17 and revenue of $811 million came in $0.03 and $63.94 million ahead of analysts’ expectations, respectively.

Following the announcement, analysts at Stifel’s Keefe, Brueyette & Woods reiterated a Market Perform rating on the stock, while raising their price target by $1 to $15.

The firm’s report pointed out that operating EPS, excluding charges, reached $0.25, beating KBW’s estimate of $0.17 on the back of stronger homebuilding revenues, gross margin and SG&A. Orders also came in 8 percent higher than experts anticipated, while absorption pace spiked up 10 percent.

In addition, management team upped its full year revenue and SG&A leverage. However, on the other hand, it timed its gross margin outlook to account for more robust sales in lower margin legacy communities.

Taking all of this into account, analysts decided to maintain their forward estimates unchanged, arguing that, “stronger homebuilding revenue and SG&A leverage are offset by lower gross margins.”

The price target was boosted to account for a “roll-forward of book value, as well as potential for reduced leverage in 2017.”