What investors should expect from KB Home’s third quarter results (KBH)

Home Ko KBH is expected to release its results for the third quarter of fiscal 2020 (ended August 31) on September 22, after market close.

In the most recently published quarter, its profits were 16.3% higher than Zacks’ consensus estimate and were up 173% from the previous year. The company’s earnings have exceeded analysts’ expectations in 21 of the past 22 quarters. Its revenue also exceeded the consensus mark of 2.3% and improved 57.7% year-over-year.

Trend in revised estimates

For the reportable quarter, Zacks’ consensus estimate has remained unchanged over the past 30 days at $ 1.60 per share. This indicates a 92.8% increase from earnings of 83 cents a share a year ago. The consensus estimate for revenue is set at $ 1.56 billion, which suggests a 56.2% increase from the previous year’s quarter.

KB house price and EPS surprise

KB Home price-eps-surprise | Quote from the house KB

Factors in play

Income: KB Home is expected to have generated an increase in housing income in the fiscal third quarter over last year’s level thanks to higher shipments as lower borrowing costs, improved economy, more Government stimulus measures and the vaccination campaign have encouraged buyers.

Zacks’ consensus estimate for the company’s home construction income – including housing and land – is set at $ 1,557 million, which indicates a 56.5% increase over the previous year. period of last year. Within residential construction, the consensus mark for housing income is $ 1,555 million, indicating a 58.8% increase over the previous year period. The same for property income is set at $ 2.25 million, which indicates a decrease from $ 16 million a year ago.

Additionally, higher prices will be a major contributing factor. The consensus estimate of the Average Selling Price (AVP) is $ 421,000, which indicates growth from the $ 385,000 reported a year ago. For the quarter, the company expects ASP of $ 420,000, which indicates an increase from the $ 384,700 reported a year ago.

The consensus estimate of units delivered is set at 3,712 units, suggesting growth of 45.9% compared to last year’s level. He expects housing incomes to be between $ 1.5 billion and $ 1.58 billion, indicating an increase from $ 995.1 million a year ago.

Order books and orders: The company’s strong backlog, which is a key indicator of significant growth opportunities, bodes well. The same for the order book is 10,135 units, which implies a notable growth compared to the 6,749 units declared the previous year.

The consensus estimate for new orders is currently set at 3,813 units, suggesting a 9.5% year-over-year decline.

Margins: Higher average sales and strong demand are expected to have increased margins in the reporting quarter. While higher material and labor costs likely put pressure on results, its initiatives such as the yield-driven growth plan, tailor-made approach and aggressive investments in the Land acquisition as well as development are likely to have somewhat offset these headwinds.

The company expects the residential construction operating profit margin (excluding the impact of inventory-related charges) to improve from 11.7 to 12.1% for the quarter, suggesting an increase from 9 , 6% a year ago. Assuming there are no inventory-related costs, KB Home expects a sequential increase in housing gross margin in the fiscal third quarter to 21.7% and a further improvement in it in the last quarter. fourth trimester. The general and administrative expense ratio will be approximately 9.8%.

What our model says

Our proven model does not conclusively predict an increase in profits for KB Home this time around. The combination of a positive earnings ESP and a Zacks # 1 (strong buy), 2 (buy) or 3 (hold) ranking increases the odds of beating the winnings. This is not the case here, as you will see below.

ESP on income: The company has a revenue ESP of +1.12%. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.

Zack Rank: Currently, KB Home carries a Zacks Rank # 4 (Sell).

You can see The full list of today’s Zacks # 1 Rank stocks here.

Actions with favorable combination

Here are a few companies in the Zacks Construction sector, which our model shows have the right mix of elements to show a beaten profit in their respective quarters to report.

Aspen Aerogels, Inc. ASPN has + 2.60% revenue ESP and holds a rank 3 of Zacks.

Quanta Services, Inc. PWR has + 3.55% Revenue ESP and Zacks # 2 rank.

ChampionX Corporation CHX has + 6.74% Revenue ESP and Zacks # 3 rank.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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