KB Home stock maintains buy rating at UBS on pricing strategy success

Investing.com - UBS reiterated a Buy rating and $80.00 price target on KB Home (NYSE:KBH) on Tuesday, despite the homebuilder experiencing softer than normal seasonal absorption in the second quarter. Currently trading at $53.19, InvestingPro analysis suggests the stock is undervalued, with a P/E ratio of 6.82 and strong financial health score.

KB Home successfully implemented its pricing strategy across its footprint in the second quarter, with the company able to raise or maintain pricing in various communities throughout the country, according to UBS. The company’s strong financial position is evident in its impressive current ratio of 5.81, indicating robust liquidity. Get deeper insights into KB Home’s financial health with InvestingPro, which offers 10+ additional exclusive tips and comprehensive analysis.

The homebuilder reported strong performances in Las Vegas, the Inland Empire, Northern California, Houston, San Antonio and Tampa, while experiencing softer conditions in Austin, Colorado and Jacksonville.

KB Home faced some delays in opening communities during the second quarter, which it attributed to understaffing at municipalities. The company estimates these delays resulted in a couple hundred foregone sales in the quarter.

UBS noted that KB Home expects to recoup these sales as the delayed communities come online, with consumers continuing to respond positively to the company’s pricing actions throughout the quarter.

In other recent news, KB Home reported its second-quarter earnings for 2025, with earnings per share (EPS) of $1.50, slightly surpassing the forecast of $1.46. The company’s revenue stood at $1.5 billion, aligning with expectations. Despite meeting revenue forecasts, the company revised its fiscal year 2025 housing revenue guidance to a range of $6.3 billion to $6.5 billion, reflecting adjustments to market conditions. Keefe, Bruyette & Woods (KBW) lowered its price target for KB Home from $65 to $58, citing concerns over margins and higher SG&A expenses. The firm maintained a Market Perform rating, acknowledging near-term risks balanced between market stabilization and further weakening.

KB Home’s management noted a challenging housing market, with a decline in orders by 13% year-over-year, prompting the company to scale back land investment and focus on share repurchases. The company repurchased $200 million in shares during the second quarter, indicating a strategic shift in capital allocation. Analysts at KBW observed that KB Home’s valuation approaches historical trough levels outside of recessions. The company continues to emphasize its built-to-order strategy, accounting for 70-75% of its business, which has been instrumental in maintaining a competitive edge.

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