Homebuilder KB Home's new orders strengthened in its second quarter, and a recent drop in its share price means it trades around the same level as its competitors, an analyst said Monday, upgrading the stock.
Credit Suisse analyst Daniel Oppenheim, in a note to investors Monday, said the rebound in orders should continue this year.
Last week in its fiscal second-quarter earnings report, KB Home said its 2,910 new orders in the second quarter were 31 percent below last year's level, but up 59 percent from the first quarter of this year.
Oppenheim commended the company for its smaller, cheaper "Open Series" houses aimed at first-time buyers, the biggest group buying new homes, he said.
He upgraded KB Home to "Neutral" from "Underperform," also noting the recent drop in the stock price, and maintained his price target of $13.
As of market close on Friday, KB Home shares were down 31.5 percent from a year high of $19.61 in early May. Still, the stock is nearly flat since January. It has changed hands between $6.90 and $25.43 in the past 12 months.
On Monday, the stock was up 61 cents, or 4.6 percent, to $14.03 in morning trading.
Shares of rival homebuilders such as Centex Corp. and D.R. Horton Inc. have also given up gains from earlier this spring as long-term interest rates ticked higher, weighing on mortgage application volumes. Sales of used homes have also broadly outpaced new home sales.
The government said sales of new homes slipped 0.6 percent in May.
KB Home said last Friday that it lost $78.4 million, or $1.03 a share, for the three months ended May 31, compared with a loss $255.9 million, or $3.30 cents a share, last year. Sales dropped 40 percent to $384.5 million.
Analysts polled by Thomson Reuters had expected a narrower loss of 64 cents a share.
Oppenheim sees losses continuing through 2010, with a loss of $3.70 per share this year and $1.20 per share next year.
Wall Street analysts, on average, expect losses of $2.39 per share in 2009 and 8 cents per share in 2010.
Terms & Conditions
RSS Headlines
Fool UK