KBH - Embedded Expectations Analysis - 2018 11 30
KB Home (KBH:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Assets, with a 1.0x Uniform P/B, implying bearish expectations for the firm. Meanwhile, management may have concerns about their sales guidance, homebuilding and operating margins, and rising interest rates and housing pricesSpecifically, management may lack confidence in their ability to meet their Q4 2018 sales projections, and to sustain net order value growth in their Central region. Moreover, they may be exaggerating the productivity achieved by working on concept home designs, and the number of product series that can fit into the same lot sizes. Furthermore, they may be concerned about rising interest rates and housing prices, and their ability to rotate new models in quickly to adjust to these changes. They may also have concerns about their geographic mix shift in the inland California area, and their ability to maintain strong housing revenue growth. In addition, they may lack confidence in their ability to drive homebuilding and operating income margin expansion, and to maintain lower levels of incurred interest and amortization. Also, they may be concerned about their ability to meet their FY 2018 SG&A expense ratio, and to implement their Returns-Focused Growth Plan. Finally, they may have concerns about their product positioning targeting primarily first-time buyers
KB Home is a homebuilding company. The company builds a variety of homes designed primarily for first-time and first move-up, as well as second move-up and active adult homebuyers, including attached and detached single-family residential homes, townhomes and condominiums. The company's financial services operations provide various insurance products to its homebuyers in the markets where it builds homes and provide title services in certain of those markets. The company's financial services operations also provide mortgage banking services, including residential consumer mortgage loan originations, to its homebuyers indirectly through KBHS Home Loans, LLC, a joint venture the company formed with Stearns Lending, LLC.
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