On Thursday, RBC Capital adjusted its outlook on KB Home (NYSE:KBH), increasing the price target to $69 from the previous $63 while maintaining a Sector Perform rating on the stock. The adjustment follows KB Home's first-quarter performance that surpassed expectations, coupled with a stronger forecast for full-year deliveries.
RBC Capital's revised forecast includes a 6% increase in the fiscal year 2024 earnings per share estimate, now set at $7.66.
The company's first-quarter orders and gross margin percentage (GM%) presented positive results, leading to a modest upward revision in the full-year guidance. Management at KB Home anticipates that the healthy demand observed will persist into the second quarter, with trends in pricing and incentives likely to improve as the year progresses. This is expected to contribute to a slightly better full-year GM%, despite a softer GM% outlook for the second quarter.
The analyst's statement highlighted the factors influencing the revised price target, noting the positive developments in orders and GM% during the first quarter, as well as the modest increase in the full-year guidance. Additionally, the expectation of improving price and incentive trends in the second half of the year supports the updated GM% forecast for the fiscal year.
Despite these positive factors, RBC Capital has chosen to maintain its Sector Perform rating on KB Home shares.
InvestingPro Insights
KB Home (NYSE:KBH) has been demonstrating a strong performance in the market, with management actively engaging in share buybacks, as noted in one of the InvestingPro Tips. This strategy often reflects leadership's confidence in the company and can be a positive signal to investors about the company's future prospects. Additionally, KB Home has been maintaining its dividend payments for an impressive 39 consecutive years, which speaks to its commitment to returning value to shareholders and the consistency of its financial position.
InvestingPro Data further enriches this picture, revealing a market capitalization of $5.22 billion and a Price to Earnings (P/E) ratio of 9.56, which adjusts to 8.82 for the last twelve months as of Q4 2023. These figures suggest that KB Home is being valued favorably by the market, especially when considering its strong free cash flow yield, as highlighted by another InvestingPro Tip. The company's P/E ratio is particularly compelling when compared to the industry average, indicating that the stock may be undervalued.
Moreover, with analysts having revised their earnings upwards for the upcoming period, there is an anticipation of continued profitability. In fact, the company has delivered a high return over the last year, with a 93.5% one-year price total return as of the date provided, showcasing its robust performance in the market.
For investors looking for more in-depth analysis and additional InvestingPro Tips, there are 15 more tips available that could provide further insights into KB Home's financial health and stock potential. To explore these tips and gain a comprehensive understanding of KB Home's investment profile, visit InvestingPro at https://www.investing.com/pro/KBH. Additionally, use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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