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KB Home Continues Community Drive with Heritage Park Launch

KB Home KBH announced the opening of Heritage Park community in South New Braunfels. The company plans to expand its presence in the New Braunfels region.
The community’s location is easy to access by major transportation routes. It is also in close proximity to commercial and employment hubs and numerous shopping, dining entertainment centers.

KB Home has been focusing on several strategic initiatives over the last few years to drive profits. One of its primary targets has been to increase community count.

The company regularly opens communities in highly favorable submarkets to drive growth. KB Home’s recently-opened communities include Mountain Vail Reserves in Tucson, Prospect Fields in San Diego County, Edgebrook community in Bulverde, Sunrise Villas in Round Rock, and Legend Point–The Reserves in New Braunfels.

However, at the end of the last reported second-quarter 2017, average community count was 238, reflecting a decline of 2% year over year. The downside was led by a 26% decline in its Southeast region. The company anticipates third-quarter and fiscal 2017 average community count to be flat year over year. Nonetheless, these new communities are expected to drive community count considerably.

Notably, KB Home recently reported second-quarter earnings of 33 cents per share, outpacing the Zacks Consensus Estimate of 26 cents by 26.9%. The figure improved a significant 94% from the year-ago profit level. The company ended the quarter with an impressive 24% revenue growth and double-digit rise (11%) in deliveries and housing revenues (23.3%). Strong orders in value (up 15%) and backlog (up 19%) also bode well.

The company actively invests in land acquisition and development, mainly in high-end locations, which is critical for community count as well as top-line growth. KB Home had put in $1.4 billion in land and development in fiscal 2016. It has already acquired land required for fiscal 2017, which is expected to generate a steady source of income in the days ahead. In the second quarter of fiscal 2017, to drive future community openings, the company had invested $405 million in land, land development, and fees, with $204 million representing new land acquisitions.

Investors should note that KB Home’s shares have gained 50.3% year to date, outperforming the Zacks categorized Building-Residential/Commercial industry’s 27.1%. A healthy housing industry and strong demand trends in the markets served by KB Home should drive the stock’s performance in the upcoming quarters as well.

Moreover, the company has an impressive earnings history, beating estimates in all of the past four quarters at an average of 12.47%. Earnings estimates for this Zacks Rank #1 (Strong Buy) stock moved 1.2% up for the current year over the last 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Other top-ranked stocks in the broader construction sector include Lyon William Homes WLH, M.D.C. Holdings, Inc. MDC and NVR, Inc NVR.

All three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lyon William is expected to exhibit 38.4% growth in 2017 earnings.

M.D.C. Holdings is estimated to witness 27.9% earnings growth, while NVR is likely to see 27.9% rise in earnings in 2017.

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