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On Wednesday, Keefe, Bruyette & Woods adjusted its outlook on KB Home (NYSE:KBH), reducing the price target from $76.00 to $65.00, while keeping a Market Perform rating on the shares. The adjustment follows KB Home’s first-quarter earnings report, which revealed a 12% decrease in estimates due to lower delivery numbers, reduced gross margins, and increased selling, general and administrative expenses (SG&A).
The first-quarter earnings per share (EPS) for KB Home fell short due to lower deliveries, higher SG&A, and financial services performance, with year-over-year orders down by 17%, contrasting with an anticipated flat to 2% decrease. In response to the softer demand observed across the industry, KB Home has taken measures such as lowering prices in half of its communities and revising its fiscal year 2025 guidance downwards.
Despite these challenges, Keefe, Bruyette & Woods noted that KB Home’s valuation, at approximately 1.02 times its current book value and 0.93 times its forward book value, is close to historical lows, excluding recession periods. The research firm acknowledges that the near-term risks for KB Home are balanced between the potential for market stabilization and the possibility of further market deterioration, leading to the decision to maintain the Market Perform rating.
The market’s reaction to these developments will continue to be observed as investors and analysts alike assess the impact of the adjusted forecasts and strategic pricing decisions made by KB Home in the face of changing market conditions. According to InvestingPro’s Fair Value analysis, KB Home currently appears undervalued, suggesting potential upside for long-term investors despite near-term headwinds.
In other recent news, KB Home reported its first-quarter earnings for 2025, revealing earnings per share (EPS) of $1.49, which fell short of analysts’ expectations. The company also experienced a 17% decline in orders and a decrease in housing revenues to $1.39 billion, below its forecast range. Following these results, Evercore ISI reduced its price target for KB Home from $83 to $77, while maintaining an Outperform rating. Similarly, Raymond (NSE:RYMD) James lowered its price target to $65, citing a favorable risk/reward balance despite the earnings miss. RBC Capital also adjusted its price target from $67 to $63, retaining a Sector Perform rating and highlighting potential risks to fiscal year 2025 forecasts. Wolfe Research further reduced its price target to $60, maintaining an Underperform rating, and expressed skepticism about KB Home’s guidance on gross margins. These developments reflect broader industry challenges with demand and affordability impacting the company’s financial outlook.
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