MKM Downgrades KB Home, Says Confidence Loss 'Hard To Win Back'

KB Home

missed its Q415 earnings, and analysts at MKM Partners say that the confidence loss is "hard to win back." On Friday, the firm downgraded KBH shares to Neutral from its Fair Value estimate with a price target of $13.00. "Although KBH did beat earnings in most of 2015, we underestimated the lack of investor confidence in the company and the existence of a valuation floor in the shares," the firm commented. "4Q15's earnings miss, in our view, puts KBH back at the starting line from a confidence standpoint and we fear another year like 2015." MKM expects the company's order growth could slow dramatically and miss FY15's levels. "The company has guided to much slower community count growth in FY16 -essentially flat by the end of the fiscal year and in the low single digits in the first quarter. The company did not articulate any plans to accelerate its absorption pace throughout the year and therefore indicated that it would generally expect its order growth to be generally in-line with its community count growth," MKM noted. Shares of KBH plummeted almost 15 percent on Thursday's trading session. The stock hit a new 52-week low of $10.05 following the company's report of disappointing 4Q15 and full-year results.