UBS Raises Price Target on KB Home (KBH) to $12 as HB EBIT Margin Drives 2Q
UBS maintained a Sell rating on KB Home (NYSE: KBH), and raised the price target to $12.00 (from $11.00), following the company's 2Q earnings report. KBH reported EPS of $0.22, ahead of UBS' $0.18 estimate. The outperformance was primarily driven by better than expected HB EBIT margin.
Analyst Susan Maklari commented, "KB reported F2Q EPS of $0.22—based on a normalized tax rate and excluding charges related to the company's exit of the Washington D.C. market—ahead of our $0.18 forecast. The outperformance was primarily driven by better than expected HB EBIT margin (ex. impairments, incl. interest), adding ~$0.04 to EPS. Additionally, HB revenues increased 33% (+30% in units & +2% in ASP) vs. our forecast of +21% (+15% in units & +5% in ASP), a ~$0.02 benefit to the quarter. This was partially offset by lower than expected profit from financial services and JVs, reducing EPS by ~$0.01. We note that results in the quarter were impressive and reflect the strength of demand through the spring, especially among first time and entry level buyers."
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Shares of KB Home closed at $14.54 yesterday.