KB Home: Waiting on Margin News Despite Strong Preliminary Report

(This is an excerpt from an article I originally published on Seeking Alpha on February 12, 2015. Click here to read the entire piece.)

KB Home (KBH) has made good on its promise to focus more on short-term monetization. Since reporting disappointing earnings on January 13, 2015, KBH has already announced six openings, grand openings, and new communities, all in time for the Spring selling season.{snip}


KB Home (KBH) has gained 16% from recent lows, but tough resistance looms overhead
KB Home (KBH) has gained 16% from recent lows, but tough resistance looms overhead

The momentum has culminated in a preliminary orders report that includes some very strong numbers for KBH:

{snip}

The company went on to applaud its “positive revenue outlook for the remainder of the year, particularly in the third and fourth quarters.” Notably absent was any information on gross margins, the biggest concern that investors had coming out of KBH’s last earnings report. {snip}

For context, home builders in general have enjoyed a strong rally since mid-January. {snip}


Is iShares US Home Construction (ITB) finally ready for a true breakout?
Is iShares US Home Construction (ITB) finally ready for a true breakout?

The rally in ITB has been supported by a series of earnings reports that provided great relief to the bad news KBH delivered on January 13th. As I suspected at the time, KBH’s problems were more company-specific than indicative of general industry woes.

{snip}


Toll Brothers has managed to rally to an overall gain since reporting earnings in November. The stock is now trading back to highs from last summer.
Toll Brothers has managed to rally to an overall gain since reporting earnings in November. The stock is now trading back to highs from last summer.

Source for charts: FreeStockCharts.com

Be careful out there!

Full disclosure: long TOL call options

(This is an excerpt from an article I originally published on Seeking Alpha on February 12, 2015. Click here to read the entire piece.)

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