Yahoo Finance KB Home and Lovesac have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 19, 2024 – Zacks Equity Research shares KB Home KBH as the Bull of the Day and The Lovesac Company LOVE as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Company F, Toyota Motor Corp. TM and Volvo VLVLY.
Here is a synopsis of all five stocks.
Bull of the Day:
KB Home is having a great spring home buying season even as mortgage rates rise. This Zacks Rank #1 (Strong Buy) just raised its dividend 25%.
KB Home is one of the largest homebuilders in the United States. Headquartered in Los Angeles, it operates in 47 markets, and has built over 680,000 homes in its 65-year+ history.
KB Home Raises Its Dividend and Announces a $1 Billion Share Repurchase Plan
On Apr 18, 2024, KB Home announced that the Board of Directors had authorized the repurchase of up to $1 billion of stock. This authorization replaces the prior one, which had just $113.6 million remaining.
In 2024, the company expects to buy back between $200 million and $400 million in shares. That includes the $50 million it has already completed in the fiscal first quarter.
The Board also raised the quarterly cash dividend by $0.05 to $0.25 from $0.20. The 25% increase results in an annual dividend of $1.00 per share which is a yield of about 1.6%.
The new dividend will be payable on May 23, 2024, to stockholders of record as of May 9, 2024.
KB Home is shareholder friendly. From 2020 to 2023, KB Home returned $951 million in cash to shareholders through dividends and share repurchases.
5th Earnings Beat in a Row
On Mar 20, 2024, KB Home reported its fiscal first quarter 2024 results and blew by the Zacks Consensus Estimate by $0.20. Earnings were $1.76 versus the consensus of $1.56.
This was the company's fifth earnings surprise in a row.
KB Home said it generated solid results that were either "at or above the high end" of their guidance ranges.
It saw positive momentum in demand as buyers flocked to sales centers once again. Net orders rose 55% to 3,323 due to improved demand and a lower cancellation rate compared to the year ago quarter.
The cancellation rate as a percentage of gross orders improved to 14% compared to 36% a year ago. Gross orders were also up 15% to 3,873.
One of the most important metrics for the home builders is gross profit margin. KB Home's gross profit margin in Q1 was 21.6%, just slightly less than last year's margin of 21.8%.
On Mar 20, KB Home said that first quarter momentum had continued into the start of the second quarter as well.
Analysts Bullish on Fiscal 2024 and 2025
The analysts have been cautious on the homebuilder stocks since the Fed started raising rates in Mar 2022. Earnings did come down from the 2021 highs as mortgage rates rose and sales slowed.
But home buyers appear to be adjusting to the higher rates. And with such a low inventory of existing homes, many buyers are looking to new homes instead. The builders still have pricing power.
6 estimates have been revised higher for KB Home for fiscal 2024 in the last month. This has pushed the Zacks Consensus up to $8.01 from $7.59 during that time. That's earnings growth of 13.9% as KB Home made $7.03 last year.
They are equally bullish on next year as well. The fiscal 2025 Zacks Consensus Estimate has jumped up to $8.72 as 6 estimates have been revised higher in the last 30 days. That's another 8.8% earnings growth.
The Stock Is Dirt Cheap
Mortgage rates are back over 7% again in Apr 2024. That has spooked Wall Street again and they have sold off shares of KB Home over the last month. It is down 8.6% over that period.
The stock remains dirt cheap even though it hit new all-time highs earlier this year. KB Home trades with a forward P/E of just 7.6.
It also has a PEG ratio of just 0.7. A PEG ratio under 1.0 usually indicates a company has both growth and value. That's a rare combination.
For investors interested in a home builder with a rising dividend and earnings growth, KB Home should be on your short list.
Bear of the Day:
The Lovesac Company is hoping to buck the trend of slower sales in the furniture industry in fiscal 2025. This Zacks Rank #5 (Strong Sell) is still expected to deliver double digit earnings growth this year.
Lovesac designs and manufactures furniture that it intends to last a lifetime. It's current product offering is made up of modular couches, called Sectionals, premium foam beanbag chairs called Sacs and their associated home decor accessories.
It sells primarily online through its web site but also has 116 retail showrooms.
A Miss in the Fiscal Fourth Quarter 2024
On Apr 11, 2024, Lovesac reported its fiscal fourth quarter and full year 2024 results. It missed on the Zacks Consensus, reporting $1.87 versus the Zacks Consensus of $1.93. It was a miss of $0.06.
While furniture sales industry-wide have fallen as home sales have fallen, Lovesac saw revenue grow 7.5% to $700.3 million, with the caveat that there was an additional week of sales in fiscal 2024.
The year was boosted by showroom net sales, which included kiosks and mobile concierges, which rose 9.8%. Internet net sales also increased, rising 13.2%. Only the "other" category fell. That primarily included pop-up-shops and shop-in-shops. Sales fell 17.5%.
Gross margin for the year rose 450 basis points to 57.3% from 52.8% a year ago.
Guided Below Consensus for Fiscal 2025
While the company is seeing better-than-expected demand, it guided for full year 2025 in the range of $1.06 to $1.59. This was below the Zacks Consensus.
Lovesac is a small cap company, with a market cap of just $315 million. It doesn't have a lot of analyst coverage on Zacks.com.
One estimate has been cut since the earnings report. That has pushed the Zacks Consensus Estimate down to $1.86 from $2.22.
That's still above the guidance range. It's also earnings growth of 28.3% in fiscal 2025 as the company made $1.45 last year.
1 estimate was also cut in the last 7 days for fiscal 2026. That pushed the Zacks Consensus down to $2.64 from $3.00. But it's still another 42.2% earnings growth.
Shares Fall in 2024
Shares of Lovesac have fallen 22.7% year-to-date.
It's cheap. It trades with a forward P/E of just 10.8. It also has a PEG ratio of just 0.3. A PEG under 1.0 usually indicates a company has growth and value.
But until the estimates start going the other way, which means up, investors might want to stay on the sidelines.
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Ford Motor Company (F) : Free Stock Analysis Report
Toyota Motor Corporation (TM) : Free Stock Analysis Report
KB Home (KBH) : Free Stock Analysis Report
AB Volvo (VLVLY) : Free Stock Analysis Report
The Lovesac Company (LOVE) : Free Stock Analysis Report
