KB Home and Lennar (LEN) sent both homebuilding sector higher Wednesday, but there can only be one king in the home.
The initial picture of the two latest earnings reports favored KB Home, given that it was able to beat profitability estimates while Lennar was not. However, the share reaction on Wednesday sent Lennar much higher at a percentage compared to bullish comment from Lennar's CEO Stuart Miller.
So it is worth investigating why the market preferred Lennar Wednesday and more importantly whether they are right or not.
One of the attractive aspects of homebuilders is their low price-to-earnings ratio.
Despite the fact that over 20% turks for each stock, this idea has not changed for every stock that both orders a forward-price-to-earnings ratio of around 9.
Lennar is a bit cheaper yet, which marks an 8.7 P / E ratio of KB Home's 9.1
Analysts have noticed that KB can actually end up being expensive compared to peers after running into earnings, promoting a pessimistic stance from many market guards.
"We maintain our relative underweight classification, as we see KBH's valuation, trading at about 9.5x and 8.5x our 2019 and 2020 EPS estimates, which are essentially in line with its smaller colleagues, so expensive says JP Morgan analyst Michael Rehaut.
He advises that investors temper their prospects over the next two years, although a dovish Fed is trying to carry the sector in 2019.
With some of these more bearish notes on Wednesday, the consensus has come to a "hold" with a price target of $ 24.22.The consensus goal is actually below Wednesday's trading price in that lens, suggesting that many believe the stock has already seen its value recognized in its midst. rapid races to start in 2019.
"We continue to believe that the company's below average growth and return prospects are not priced at current-level stocks and repeating seller rating and $ 17 pricing targets, BTIG analyst Carl Reichardt, Jr. says. Wednesday. "We think investor concerns about California, shared by us, are likely to continue to weigh on the shares over the medium term and will lead to underperformance."
Meanwhile, the analyst's consensus on Lennar is a "buy" with a consensus price target set at $ 56.61. This price target, unlike KB Home, still offers some room for growth from Wednesday's price.
"While 1Q EPS was slightly below our estimate and Street, partly due to gross margins at the low end of the guide and below our estimate as well as closures are affected by weather, at the same time, order growth was better than our estimate and over guidance as well as We believe slightly above investors' already raised expectations, says JP Morgan analyst Michael Rehaut.
Following the company's earnings call, stocks continued ahead at the back of the bullish housing market comment.
Certainly, some analysts were happy Waiting on the sidelines in the midst of an uncertain long-term macro image.
"The company continued to make progress towards its strategic initiatives, completing the sale of its brokering business and the bulk of its retail title, title insurance and retail leasing business and repurchasing $ 4 7mn on stock, "Credit Suisse analyst Susan Maklari recognized but noted ig, that a revenue error and a need to integrate CalAtlantic, the biggest buyout of 2018.
An interesting advantage that further plays in Lennar's shot is "Golden Cross" pattern as the warehouse managed to enter on Wednesday.
"The most important element you see here is the forthcoming" Golden Cross "(the 50-day simple moving average cross over the 200-day SMA). It is a catalyst that often creates a bullish response that has recently become more Reliable in the algorithmic era than it had been when human traders controlled the point of sale, wrote "Real Money Contributor Stephen" Sarge "Guilfoyle in his real money column. "In addition, traders see a bullish appearance daily Moving Average Convergence Divergence (MACD) and a Fib retracement level of $ 50.50 that appear to be broken, which could provide support and may allow movement as high as $ 54.60 in cards for Medium Term.
KB Home does not see the same action in its charts, which means extra brownie points for Lennar in the day.
It, along with its valuation as well as management and analyst comments, make it the most compelling homebuilder stocking a big week of earnings.
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