KB Home Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and KB Home (NYSE: KBH  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, kneejerk reaction that turns out to be exactly the wrong response to the news.

KB Home has benefited greatly from the big rebound in the housing market lately. But can the homebuilder live up to the rapidly rising expectations that investors have of it? Let's take an early look at what's been happening with KB Home over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on KB Home

Analyst EPS Estimate

($0.22)

Year-Ago EPS

($0.59)

Revenue Estimate

$359.8 million

Change From Year-Ago Revenue

41%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will KB Home build up its profits this quarter?
Over the past few months, analysts have had mixed views about KB Home. They've widened their loss estimates for the most recent quarter by a penny per share, but they've upped their calls for the full 2013 fiscal year by $0.03 per share. Meanwhile, the stock has continued its strong run, rising 20% since mid-December.

KB Home has had a spectacular turnaround from a long period of poor results. As home prices have apparently bottomed, buyers have come back into the market. In January, KB Home said that new home orders had jumped by 54% during the quarter as of that point, and as a result, KB Home has seen the average value of the homes it has in its backlog rise by 35% to hit the highest level in nearly six years.

KB Home has found some novel ways to attract buyers. With a partnership with mortgage-servicer Nationstar Mortgage (NYSE: NSM  ) , KB Home can entice buyers by making their path to home ownership a bit easier to finance. At the same time, KB Home and SunPower (NASDAQ: SPWR  ) recently celebrated their collaboration, commemorating the 1,000th home built with a standard solar-power system included.

Meanwhile, investor excitement in KB Home has never been greater. Even a secondary offering of stock and convertible notes, which ordinarily might have raised concerns about shareholder dilution, was well received, with proceeds expected to go toward the company buying up more land to develop.

Still, concerns still exist. According to one analyst, both KB Home and Hovnanian (NYSE: HOV  ) suffer the competitive disadvantage of aiming at the lower end of the market, largely targeting first-time homebuyers. With rental activity still at lofty levels and affordability in many markets still a challenge, KB Home may not recover as quickly as more luxury-oriented homebuilders that attract better-off buyers.

In its quarterly report, watch for KB Home to detail its capital spending plans, with attention to where and what type of development it plans to do. With real estate still a local market, it's essential for KB Home to get its strategy right if it wants to take maximum advantage of the recovery. 

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