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Weather Could Hit Results Of Some U.S. Homebuilders

Cold winter weather in key markets will likely have an impact on quarterly results due next week from homebuilders KB Home and Lennar, according to a report issued Thursday by Sterne Agee analyst Jay McCanless.

KB Home (KBH) is slated to report its fiscal first-quarter earnings before the open on Wednesday. Analysts polled by Thomson Reuters expect earnings per share of 9 cents for the quarter, which ended in February. That compares with a loss of 16 cents the prior year. Sales should rise 8% to $437 million.

Lennar (LEN), the No. 1 U.S. builder by market cap, is due to report its fiscal Q1 earnings before the open on Thursday. Analysts expect EPS to rise 8% to 28 cents. Sales are seen climbing 29% to $1.28 billion.

Those numbers will likely be impacted by the harsh weather that pounded large sections of the country during the winter, including the Southeast, Midwest, Mountain States and Northeast.

"With fiscal quarters ending in February, LEN and KBH did not get a break from the worst of the winter weather," McCanless noted. "We estimate approximately 14% of KBH's communities and 26.8% of LEN's communities are located in Metropolitan Statistical Areas affected by the unseasonably cold weather and ice storms from December to February.

McCanless says weather issues for the quarter "are well known, and we anticipate investors are willing to look through them.

At the same time, he said, "If order growth is below our expectations for (the quarter) and the management teams do not have some encouraging commentary about March, then we believe each company's stock price could come under pressure.

Lennar shares fell nearly 3% in the stock market on Thursday. KB Home shares declined nearly 2%. The builders' stocks are down 8% and 15% respectively for the month.

Meanwhile, Credit Suisse analyst Daniel Oppenheim on Wednesday downgraded three builders, citing "continued weakness in demand," among other things.

He downgraded Pulte Group (PHM) to neutral from outperform; Toll Bros. (TOL) to neutral from outperform; and William Lyon Homes (WLH) to neutral from outperform.