KB Home (NYSE:KBH) Metrics Solid in Most Metrics

Other than their Orders segment, all the metrics for KB Home (NYSE:KBH) were strong in the latest quarter, which should give KBH a challenge in the first half, largely on market conditions.

Ticonderoga noted, "Subsequent to KBH’s Q3 conference call, we wrote that the company had 'plenty of work ahead.' Given results posted this quarter, it is obvious management has been plenty busy. Indeed, the company’s results were impressive on just about all metrics with the exception of Orders and thus Backlog. With the latter two more a function of the market, we are not overly concerned specifically with KBH. While those issues make for a challenging first half of 2011, the company’s projected 25% community count positions KB for a solidly profitable second half and full-year result, in our view. We note our forecasts already had incorporated losses for the first and second quarters of this year, so the just-completed quarter’s poor Order performance does not impact our thesis with respect to the equity.

"We have believed for some time that management’s renewed focus on cost control would turn this story profitable more quickly than investors suspected. This quarter’s magnitude of improvement surprised us, but the direction did not...However, management’s commentary with respect to elevated cancellations in October and November causes us consternation...With respect to Inspirada, management’s discussion left us wanting."

Ticonderoga maintains a "Buy" rating on KB Home, which closed Monday at $14.71, losing $0.54, or 3.54 percent. Ticonderoga has a price target of $16 on them.