KB Home Earnings Preview: Expectations Are Very Low; But, Will We See A Comeback?

Shares ofKB Home KBH are slightly up on Thursday, ahead of the announcement of the company’s second quarter financial results, scheduled for Friday morning – before the market open. According to Estimize, however, the homebuilder is expected to deliver a year-over-year decline in earnings of 62 to 67 percent.

In the second quarter of 2014, the company reported earnings of $0.27 per share on revenue of $565 million. For the current quarter, the Street models consensus earnings of $0.09 per share on revenue of $655 million, while the crowd projects consensus earnings of $0.10 per share on revenue of $656.32 million.

Nonetheless, these figures would imply a small surge from last quarter’s earnings of $0.08 per share and revenue of $580.12 million.

One thing should be noted from the chart above: there is no clear trend in KB Home’s history to suggest a beat or miss this quarter.

A Comeback Player

In a recent report, MKM Partners’ managing director Megan McGrath looked into the homebuilding sector and revealed her top picks.

Related Link: MKM Partners - Homebuilder Update & 2 Top Picks

While many Wall Street analyst firms like Barclays or Citigroup don’t seem to be particularly fond of KB Home, MKM sees it as a value pick for sector "comeback player" of the year.

The firm has set a $20 price target, which implies plenty of upside potential. A recent Benzinga article (linked above) explains, “McGrath's KB Home thesis is fairly straightforward: if KBH can put together a couple of good quarters in a row, the valuation discount versus sector peers should begin to close.”