Goldman Sachs Maintains Neutral on KB Home After Lackluster Quarter

Goldman Sachs has published a research report on KB Home KBH after the company reported an uneventful quarter. In the report, Goldman Sachs writes, "We maintain our Neutral rating on KB Home following a lackluster quarter. Furthermore, the company may have set itself a high bar for 2012 in terms of expectations for margin improvements and top line. A few key thoughts: (1) KB Home's gross margin miss during the quarter was disappointing. While we expect mix shift, flat incentives and leverage to aid margins, with FY2011 gross margins at 15.4% (FY2010 was 18.6%) the trajectory for improvement in FY2012 does not appear well defined. Although, KB Home cites upcoming drywall related accrual reversals as being beneficial to margins, investors are likely to view such reversals as 1X in nature. (2) KB Home enters FY2012 with a robust backlog, which gives the company the ability to pull a few levers operationally." Goldman Sachs maintains its Neutral rating and $6.50 price target on KB Home, which is currently trading down $0.12 from yesterday's $7.22 closing price.