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KB Home Eyes Expansion in San Antonio With Champions Landing

Zacks Equity Research

KB Home KBH recently unveiled a new single-family home community, Champions Landing, in San Antonio. The community — which is located near Loop 1604 and Highway 90 — is easily accessible to downtown San Antonio, and notable employers like Lackland Air Force Base and Southwest Research Institute.

At the property, KB Home plans to construct 207 single and double-story homes in 10 distinct floors. Remarkably, Champions Landing will be built per the latest ENERGY STAR guidelines, including the WaterSense label. Given that these new homes are more energy and water efficient, homebuyers are expected to save $816-$1,368 per annum in utility costs.

Recent Community Openings

On Jun 1, 2019, KB Home announced the opening of a new single-family community named Oak Vista in Rocklin. Also, on May 31, it unveiled its newest collection of three single-family community, Wildflower at Harvest at Limoneira in Santa Paula, and The Enclaves and The Traditions in Buckeye, AZ.

KB Home entirely focuses on serving customers with Built-to-Order approach, which allows buyers to choose from a wide range of options to personalize their homes. The company has its own design studio named KB Home Design Studio, a retail-like showroom wherein homebuyers have access to a variety of choices.

It has gained a competitive advantage over peers and lowered the cost of production with the help of consumer-centric approach. The latest move underscores the company’s aim of boosting single-family home count and is in line with its plan of continuous brand expansion, which is likely to drive net orders and in turn revenues.

Our Take

Although homebuilding revenues declined in the last reported quarter, attributed to lower demand, we believe that commitment toward expansion and differentiated customer offerings give it a competitive edge over peers.

Coming to price performance, shares of KB Home have outperformed its industry so far this year. The stock has gained 39% compared with the industry’s rally of 31.6% in the said period. Notably, the company’s earnings for the current year are projected at $2.63 per share, indicating 53.8% year-over-year growth.

Its second-quarter 2019 backlog is currently projected at 5,830 units, up from the year-ago reported figure of 5,787 units. The average community count is expected to grow nearly 252 compared with 215 recorded in the prior-year period.

Zacks Rank & Key Picks

Currently, KB Home carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are NVR, Inc. NVR , PulteGroup, Inc. PHM and Taylor Morrison Home Corporation TMHC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVR, PulteGroup and Taylor Morrison surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 17.6%, 13.5%, and 38.7%, respectively.

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