J.P. Morgan analyst Michael Rehaut has maintained their neutral stance on KBH stock, giving a Hold rating on September 26.
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Michael Rehaut has given his Hold rating due to a combination of factors influencing KB Home’s current and future performance. The company’s renewed focus on improving margins and returns, led by CFO Rob Dillard, is a positive step, but it also highlights the challenges KB Home faces in maintaining competitive market positions. The emphasis on holding top five market positions is crucial, as these regions are significantly more profitable, yet achieving this goal may require strategic exits from less profitable markets.
Furthermore, while there is potential for growth in community count by the end of FY25 and into 1H26, the company’s backlog and shift towards a higher mix of build-to-order closings present potential headwinds. KB Home’s valuation, trading slightly below its smaller-cap peers on EPS and modestly above on P/B, reflects a balanced outlook with below-average gross margins and average operating margins. These factors collectively support the Hold rating, as the stock’s current valuation appears to fairly represent its fundamental prospects for FY25-26.
KBH’s price has also changed moderately for the past six months – from $55.610 to $65.760, which is a 18.25% increase.