KB Home (KBH-N)

Lennar and KB Homes They report Wednesday and he expects soft quarters. Mortgage rates are soaring so fast. However, these shares climbed today in a rough market, perhaps because investors feel that the Fed will hold off on rapid-fire rates after next Wednesday.

It has the lowest PE in the S&P 500 at slightly more than 2x. This usual means the estimates are way too high. They report Wednesday. If Lennar stock doesn't go down after their Tuesday report, then buy KB.

An analyst downgraded it today. The averaging selling prices for homes remain great, says the company, without signs of slowing. Q1 revenues were up 23% but slightly missed estimates. It's down nearly 10% in the past week. They fell short on the top and bottom lines. However, they have a very strong backlog to fulfill and management maintained their full-year forecast as the company expects higher prices. It now trades at a big discount to book value. Instead of buying back shares (at low share prices), the company would rather buy more homes. The homebuilders are cyclicals . Also, can they execute? Supply china shortages are a problem.

Home demand will remain strong will at least the end of the year, though skyrocketing labour and materials costs like lumber and metals are a a problem. Last week, KBH reported a disappointing quarter, though management raised parts of guidance. The averaging selling prices for homes (and demand) remain great, says the company, without signs of slowing. It trades at only 3.3x this year's earnings, so it could be a bargain. Q1 revenues were up 23% but slightly missed estimates. They reported great numbers in California. Shares are down nearly 10% in the past week after they fell short on the top and bottom lines last week. However, they have a very strong backlog to fulfill, and management maintained their full-year margin forecast as the company expects higher home prices. The CEO says their biggest challenge is completing homes. Shares now trade at a big discount to book value. If they start buying back stocks, he's in, but if not, he's on the sidelines.

It reports Wednesday. He expects good numbers, and shares could rise, setting aside fears of rising rates impacting the homebuilders. However, he thinks Toll Brothers and Lennar are better in homebuilders.

Trades at less than 7x earnings. Cheap. This and its peers are pricing in a much higher mortgage rates and no customers in the future. So, they don't reflect the current rampant demand for new homes. If the Fed's Jay Powell keeps interest rates low, homebuilding stocks will roar. The U.S. is currently building 1.6 million homes, but demand is for 2 million.

KB needs to confirm what Lennar said about the hot state of the housing market. Sure, this sector is cyclical, but won't be harmed by a few rate early hikes a year or two later. Otherwise, buy Lennar who just reported a fine quarter.

Are a U.S. homebuilder in 40-50 markets with a long track record. He really likes their 1.4x price to book value vs. peers around 2.1x. Likes their built-order model which offers better pricing power and wider margins. KBH good value. No, he doesn't see a Canadian housing crash. Rather, there's a supply shortage, particularly in cities like Toronto and Calgary, restricting more single-family homes. Eventually, the government will welcome more immigrants which will exacerbate supply further. That said, borrowing costs remain historically low.

Homebuilding stocks are propped up by low interest rates and people moving out of cities to suburbs or the country because of Covid. BK reports Tuesday.