KB Home's FY24 Forecast Gets A Boost As High Orders Promise Stronger Closings, Credit Suisse Analyst Says

Credit Suisse analyst Daniel Oppenheim reiterated a Neutral rating on the shares of KB Home KBH and raised the price target from $42 to $51.

The analyst raised the FY23 EPS estimate to $6.60 from $5.30 due to the upside in 2Q and higher closing volume expectations for 2H23.

The estimate for FY24 EPS was also increased by the analyst to $5.95 from $3.95 as the higher orders in 2023 result in stronger closings in 2024.

The analyst expects slight sequential declines in margins based on pressure on the need to spur buyers.

The analyst sees KBH’s gross margins to fall sequentially through 2023, with 3Q and 4Q gross margins of 20.9% and 20.4%, respectively.

Over 13,000 closings are expected in 2023 (up from 11,215 previously), based on stronger orders and improving construction cycles.

The key upside risk to the analyst’s forecast would be a sharp reduction in mortgage rates and improved affordability, while downside risk would come from more significant land impairments than anticipated.

Price Action: KBH shares are trading lower by 0.50% at $51.74 on the last check Thursday.