Cramer Talks KB Home Earnings, Implications For Housing Sector

At first glance, February's 8.7-percent drop in housing starts looks "truly pathetic," but it actually represents a "natural decline," according to CNBC's Jim Cramer.

What Happened

Homebuilder KB Home KBH reported "very good" numbers in its Tuesday earnings report, and management followed up with encouraging guidance for the spring selling season, Cramer said during his "Mad Money" show Tuesday.

Coupled with the decrease on 10-year Treasury yields, investors should be able to profit from the housing industry, which is poised to enjoy its "annual spring rebound," the CNBC host said.

One of the more direct plays on housing is KB Home, whose stock remains "incredibly cheap" on a P/E basis, Cramer said.

Why It's Important

Retailers of home-improvement products, including Home Depot Inc HD and Lowes Corporation LOW, saw their stocks come under pressure as a result of the poor February housing data.

Investors who sold off the weak data should "maybe get their head checked," as the sector is approaching the outdoor season, or "Christmas time for these companies," Cramer said.

What's Next

Investors shouldn't be afraid of the "hideous housing numbers," and intelligent investors buying on recent weakness should see a profit, Cramer said.

Other options investors may want to consider include the leading homebuilder Lennar Corporation LEN and affordable homebuilder D. R. Horton Inc DHI, in Cramer's view. 

Related Links:

KB Homes Analysts React To Q1 Earnings Beat, Revenue Miss, Note Interest Rate Effect

Raymond James Steps To The Sidelines On KB Home After 25% Run