Today is shaping up negative for KB Home (NYSE:KBH) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
After this downgrade, KB Home's 15 analysts are now forecasting revenues of US$6.9b in 2023. This would be a meaningful 10% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to climb 10% to US$8.43. Prior to this update, the analysts had been forecasting revenues of US$7.7b and earnings per share (EPS) of US$9.47 in 2023. Indeed, we can see that the analysts are a lot more bearish about KB Home's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting KB Home's growth to accelerate, with the forecast 8.0% annualised growth to the end of 2023 ranking favourably alongside historical growth of 6.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect KB Home to grow faster than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for KB Home. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the serious cut to next year's outlook, it's clear that analysts have turned more bearish on KB Home, and we wouldn't blame shareholders for feeling a little more cautious themselves.
That said, the analysts might have good reason to be negative on KB Home, given concerns around earnings quality. Learn more, and discover the 1 other flag we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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