{"id":10702,"date":"2012-03-27T23:35:08","date_gmt":"2012-03-28T03:35:08","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=10702"},"modified":"2012-03-27T23:35:08","modified_gmt":"2012-03-28T03:35:08","slug":"outlook-kb-home-continues-to-improve","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/27\/outlook-kb-home-continues-to-improve\/","title":{"rendered":"Outlook For KB Home Continues To Improve"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on March 26, 2012. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

Despite an improving outlook for KB Home (KBH), the stock sold off post-earnings on Friday. KBH dropped 8.5% for the day after dropping as much as 15.0% and after closing the entire loss for the day at one point. Interestingly, the trading action took KBH below its 50-day moving average (DMA) and kept the stock directly under its long-term, multi-year downtrend (shown in my previous post “Bears Load Up Ahead of Earnings for KB Home<\/a>“).<\/p>\n


\n
\"KBH<\/a>
KBH drops post-earnings from long-term downtrend and 50-day moving average (DMA)<\/figcaption><\/figure>
\n
\n
\"KBH<\/a>
KBH closes the entire post-earnings gap before settling down for a loss on the day<\/figcaption><\/figure>
\n<\/center><\/p>\n

The lift from the lows occurred as the earnings conference call revealed that headlines about an 8% year-over-year decline in net orders (105 homes) masked very encouraging results and an outlook that continues to improve. {snip}<\/p>\n

My continued longer-term optimism on KBH is based on reviewing the transcript of the earnings conference call<\/a> (from Seeking Alpha) on top of all the other catalysts I have discussed in previous posts. {snip}<\/p>\n

Here are the other items from the earnings conference call, including the Q&A, that caught my interest:<\/p>\n

{snip}<\/p>\n

Mezger went on to explain that three key factors contributed to the decline in net orders:<\/p>\n

    \n
  1. The cancellation rate temporarily surged as various mortgage companies under-performed. Moreover, their primary lender, Metlife, exited the retail mortgage business in early January.<\/li>\n
  2. Improved conditions in the housing market encouraged KBH to increase<\/strong> prices on many of the homes in its standing inventory. This slowed the clearing of unsold homes, but they are getting sold now at higher margins.<\/li>\n
  3. The strategic shift out of markets in South Carolina, Charlotte, and Arizona impacted year-over-year comps.<\/li>\n<\/ol>\n

    {snip}<\/p>\n

    For some final context on the market’s sentiment toward homebuilders, the monthly chart for the SPDR S&P Homebuilders ETF (XHB) demonstrates that the latest “recovery run” remains strong and steeper than ever. I maintain that dips from these levels should be bought as momentum builds toward an eventual bottom in the housing market.<\/p>\n


    \n
    \"XHB<\/a>
    XHB continues to build toward a lasting bottom<\/figcaption><\/figure>
    \nSource for charts:     FreeStockCharts.com<\/a><\/strong>
    \n<\/center><\/p>\n

    Be careful out there!<\/p>\n

    (This is an excerpt from an article I originally published on Seeking Alpha on March 26, 2012. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

    Full disclosure: net long KBH<\/p>\n","protected":false},"excerpt":{"rendered":"

    (This is an excerpt from an article I originally published on Seeking Alpha on March 26, 2012. Click here to read the entire piece.) Despite an improving outlook for KB Home (KBH), the stock sold off post-earnings on Friday. KBH dropped 8.5% for the day after dropping as much as 15.0% and after closing the … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[220,35],"tags":[1593,146,147],"class_list":["post-10702","post","type-post","status-publish","format-standard","hentry","category-earnings","category-housing","tag-housing","tag-kb-home","tag-kbh"],"yoast_head":"\nOutlook For KB Home Continues To Improve - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/27\/outlook-kb-home-continues-to-improve\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Outlook For KB Home Continues To Improve - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on March 26, 2012. 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