Raymond James Upgrades KB Home Ahead of Earnings

Homebuilder sees second upgrade from investment firm this year.

Shares of homebuilding company KB Home (KBH) rallied to 20-month highs following an upgrade from Raymond James ahead of the company’s earnings report.

Raymond James raised their rating to outperform, citing the improving fundamentals in the housing market, and the potential upside in shares relative to current estimates of earnings and revenues. This is the second upgrade on shares in the past three months from Raymond James.

  • Special: Turn $10,000 Into $1 Million With Just One Stock
  • Shares of the homebuilder are up 24 percent in the past year, about 12 times higher than the return on the S&P 500 Index. Heavily-watched indicators for housing suggest that the space is still growing, albeit at a slower pace.

    Shares of KB Homes trade at 10 times forward earnings, and insiders own 12 percent of the company, a sign that their interest is aligned with that of shareholders over the long term.

    Action to take: There has been plenty of residual fear in the homebuilding companies in the past decade, and the current price relative to the housing market suggests more upside in shares from here. Investors should consider buying shares up to $35.00, although as shares just slightly missed on earnings, they can get in at a far lower price.

    Speculators may want to look at the April 2020 $37 calls, which trade for around $1.40 and offer more upside in shares against the potential loss of the option premium. In a further double-digit rally for shares, the option could at least double before expiration.