Homebuilder Shares Have Strong Spring Baked In
NEW YORK (TheStreet) -- Before homebuilders such as KB Home(KBH) and Lennar(LEN) report first-quarter earnings, investors should keep in mind that stock prices of the homebuilders already have priced in strong spring sales, according to analysts at RBC Capital Markets.
The analysts feel that short-term investors should wait for a dip to get into these companies, which have soared in some instances 66% year to date, like KB Home(KBH) . Long-term investors will benefit from a multi-year recovery in housing, RBC Capital Markets analysts said.
Of the homebuilders, Lennar and KB Home are the favorites of RBC Capital Markets.
"LEN offers investors the best risk-adjusted returns we see in the sector due to the company's proven ability to make money across the cycle and potential upside from the realization of Rialto's distressed investments," the analysts said.
RBC Capital Markets analysts have a $29 price target on Lennar. TheStreet Ratings gives Lennar a B- grade with a buy rating and a $31.06 price target. The stock has risen 31.91% year to date.
The analysts at RBC Capital Markets think KB Home has the potential to outperform its peers.
"Strong new order trends, a positive mix shift towards more profitable build to order houses and a focus on managing SG&A spending position KBH to outperform other names in the sector if current volume trends in CA & TX persist," RBC Capital Markets analysts wrote.
Their price target on the stock is $17. TheStreet Ratings gives KB Home a D+ grade and sell rating.
KB Home will report its first-quarter earnings on Friday. Analysts, on average, expect a loss of 12 cents a share on revenue of $337.72 million.
Lennar is scheduled to report first-quarter earnings on Tuesday. On average, analysts anticipate earnings of 4 cents a share on revenue of $700.8 million.
-- Written by Alexandra Zendrian
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