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KB Home (NYSE:KBH) shares were trading more than 3% higher in pre-open trading Thursday following the homebuilder’s better-than-expected Q2 earnings results, which Wall Street analysts praised.
The company posted EPS of $2.32, well ahead of the consensus estimate of $2.00. Revenue grew 19% year-over-year to $1.72 billion, beating the consensus estimate of $1.61 billion.
Ending backlog value increased 43% year-over-year to $6.12 billion, which represents the highest ever second-quarter level. Net order value increased 4% year-over-year to $2.12 billion, with net orders of 3,914 decreasing 9% year-over-year.
The builder is reaffirming fiscal 2022 guidance, although CEO Jeffrey Mezger said: “Sales rates are moderating from the exceptional levels the industry has experienced, as buyers process the impact of higher mortgage interest rates, as well as inflationary pressures.”
Mezger believes the company is well-positioned to navigate these changing market conditions due to the flexibility of its Built-to-Order business model.
Following the results, several Wall Street analysts were out positive about the stock.
Evercore ISI analyst Stephen Kim raised the price target to $50 from $46 and reiterated his Outperform rating. Kim said the strong order prices and backlog protection bode well for margins.
“While margins were largely in-line with expectations and the midpoint of guidance was maintained, the strong order price growth ($543k, up 6% q/q and 15% y/y) projects positively for its margin profile in early 2022, as it continues to build on pre-pandemic land,” the analyst commented. He adjusted FY22 and FY23 EPS estimates to $10.01 (from $9.49) and $11.27 (from $11.26), respectively.
Meanwhile, Credit Suisse analyst Dan Oppenheim is increasing 2022 estimates while lowering 2023. However, he views the stock as attractive at a 30% discount to book value. The analyst reiterated an Outperform rating and $42 price target.
“We are slightly increasing our 2022 EPS estimate to $9.90 (from $9.80), but lowering our 2023 EPS estimate more meaningfully to $11.25 (from $12.43),” Oppenheim commented. “Despite the lower 2023 estimate, we believe the stock offers upside at a 30% discount to 2Q/22 book value and a 37% discount to 2022E book value.”
