KB Home, Another Reason Not To Trust The Rebound
KB Home (NYSE:KBH) is yet another business giving a reason why you shouldn’t trust the rebound in stocks. The company reports near and long-term headwinds are mounting and cutting into the business. Supply chain shortages, materials supply, and labor issues are preventing the company from starting homes and that means it can’t complete homes or finish homes. When it can’t finish homes it doesn’t make money, when it doesn’t make money it misses its targets and when the market sees these issues setting up it will reduce its targets. When the market reduces its targets for earnings it can bring down the major indices. KB Home is not an S&P 500 company but competitors Pulte and Lennar are, and they are most likely having the same kinds of problems.
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Q4 2021 hedge fund letters, conferences and more
Large Hedge Funds Pile Into Carl Icahn’s Latest Target
Back in October last year, Carl Icahn released an open letter to Southwest Gas in which the billionaire activist investor announced that he was a large shareholder in the company, having acquired a 4.9% stake in the business. He went on to criticize management for trying to buy Dominion Energy Questar Pipeline, LLC for more Read More
“While we grew our revenues 23%, as the quarter progressed, supply chain issues intensified and an already-constrained construction labor force was further stressed, which extended our build times and delayed completions and planned deliveries. We will continue to work on addressing issues as they arise to navigate these challenges,” says CEO Jeffrey Mezger.
KB Home Grows On Price Increases, Demand
KB Home had a great quarter but there are two things that bother us. The first is the 22.8% increase in revenue is due almost entirely to pricing increases. The number of homes delivered was essentially flat versus last year and boosted by a 22% increase in average selling price. The second is that revenue, while strong, fell short of the consensus by 680 basis points in a world where demand and backlogs suggest revenue should not only be growing organically but also outpacing estimates.
Regardless, the combination of demand and higher pricing produced wider margins at both the gross and operating levels. The gross …….