Keefe, Bruyette & Woods Downgrades KB Home (KBH) to Underperform; Overvalued

Keefe, Bruyette & Woods downgraded KB Home (NYSE: KBH) from Market Perform to Underperform. PT lowered from $13 to $9.

KBW analyst says, "Shares of Lennar (NYSE: LEN) and DR Horton (NYSE: DHI) are undervalued, shares of Meritage (NYSE: MTH) and Toll Brothers (NYSE: TOL) are fairly valued, and shares of KB Home are overvalued. We see DR Horton as not receiving enough credit for its strong balance sheet. We see KB Home as having additional downside, but more importantly we expect relative underperformance in the shares for two reasons: 1) its valuation is more difficult to estimate given its large DTA relative to declining book value (200% versus 50% for peers), implying higher volatility and a discount to peers; and 2) future cash obligations further constrain the balance sheet, potentially limiting the company's ability to deploy capital into new land opportunities were the market to turn."

For more ratings news on KB Home click here and for the rating history of KB Home click here.

Shares of KB Home closed at $10.17 yesterday.

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