On Wednesday, Seaport Global Securities analysts revised the firm's stance on KB Home (NYSE:KBH), upgrading the stock from Sell to Neutral.
The analysts highlighted the company's stable gross margin guidance for the first quarter of 2025, noting it as an unexpected strength that sets it apart from its competitors.
They pointed out that KB Home's earnings before interest and taxes (EBIT) for the last twelve months (LTM) ending in the third quarter of 2024 were significantly bolstered by its operations in Western markets. These markets are currently less impacted by the increasing supply of existing homes.
The analysts emphasized that KB Home's backlog visibility contributed to the decision to upgrade the rating. Despite the presence of macroeconomic concerns, such as higher interest rates and a national rise in new home supply, they believe that KB Home's geographic distribution of operations offers it a competitive edge over its peers.
The firm's analysts adjusted the fiscal year 2024 earnings (FY24E) estimate to $8.36 per share, citing higher revenue but lower margins. Additionally, they introduced an earnings estimate for fiscal year 2026 (FY26E) at $7.41 per share, based on anticipated lower revenue.
The upgrade comes amid a broader context where housing market dynamics are influenced by regional variations. KB Home appears to be navigating these challenges with a strategy that leverages its strong presence in Western markets.
This regional focus may provide some insulation against the headwinds faced by the housing sector at large.
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