In a challenging housing market characterized by the highest mortgage rate since late 2000 and the lowest home sales since January, Goldman Sachs analyst Susan Maklari has updated her stance on two major players in the sector on Monday. D.R. Horton was upgraded to Buy, while KB Home (NYSE:KBH) was downgraded to Neutral.
D.R. Horton's shares have seen a 0.7% rise and an annual increase of 17%, driven by the company's strategic focus on pace versus price, quick move-in options, and lower-priced homes. The firm's Express Series, which faces limited competition in the market, has also contributed to its robust performance. According to InvestingPro data, D.R Horton has a market cap of 35.09B USD and a P/E ratio of 7.35. Its revenue growth for the third quarter of 2023 was 8.28%, which speaks volumes about the company's financial health. The company has also managed to maintain a high return on assets of 16.07% for the third quarter of 2023. As per InvestingPro Tips, D.R. Horton is known to yield high returns on invested capital and has raised its dividend for 9 consecutive years, which makes it a promising choice for investors. More insights can be found on InvestingPro's platform, which offers a total of 18 tips for D.R. Horton.
On the other hand, despite KB Home's shares experiencing a significant 38% surge this year, Maklari has expressed concerns about potential risks associated with the company's business model. Her main worry stems from KB Home's long conversion cycle and high percentage (75%) of build-to-order homes that could be left vulnerable in the face of escalating mortgage rates. In terms of real-time metrics, KB Home has a market cap of 3470M USD and a P/E ratio of 5.56. However, the company's revenue growth in the third quarter of 2023 stood at a mere 0.57%, indicating a slowdown. The company's return on assets for the same period was 9.86%. InvestingPro Tips highlight that KB Home's management has been aggressively buying back shares and the company has maintained dividend payments for 38 consecutive years. For more detailed information, readers can check out the 17 tips available on InvestingPro's platform for KB Home.
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