KB Home (KBH) Expands Credit Facility, Extends Maturities

KB Home KBH recently announced an amendment to its revolving credit facility, increasing the borrowing capacity to $800 million from $500 million. Also, the maturity for the revolver is extended to October 2023 from July 2021.

Moreover, the borrowing capacity can be increased to $1 billion. This is subject to certain customary conditions.

Earlier in 2017, the company had announced an increase in the credit facility to $500 million from $275 million. Since then, the company witnessed strong execution of the Returns-Focused Growth Plan, and improved revenues, margins, earnings and debt-to-capital ratio.

Specifically, with this move, KB Home expects to enhance the flexibility of its capital structure, which will further allow it to productively deploy excess cash while meeting short-term capital needs.

These efforts boost its maturity profile and help it enjoy greater liquidity for day-to-day operations. Also, the move will boost the company’s existing cash flow. Notably, KB Home has made various strategic efforts like the execution of the Returns-Focused Growth Plan that is designed to drive profitability, return on invested capital, return on equity and leverage ratio.

Notably, on Aug 31, 2019, the company’s debt-to-capital ratio was 45.1%, which improved 460 basis points (bps) from Nov 30, 2018. In fiscal 2018, its return on equity had increased 440 bps to 14.4%. For fiscal 2019, it expects to generate 10-15% return on equity.

Although fiscal third-quarter earnings and revenues declined on a year-over-year basis, the company remains upbeat about improvement in fiscal fourth-quarter results.

Notably, shares of the company have gained 77.8% in the year-to-date period, comparing favorably with its industry’s 48.7% rally. The outperformance was mainly driven by solid execution of the company’s returns-focused growth plan, balanced approach of allocating cash flow, improvement in gross margin and community count growth realization.

Zacks Rank & Other Key Picks

KB Home currently sports a Zacks #1 Rank (Strong Buy). Other top-ranked stocks in the same space include Lennar Corporation LEN, Taylor Morrison Home Corporation TMHC and Meritage Homes Corporation MTH, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lennar, Taylor Morrison and Meritage Homes’ long-term earnings are expected to grow 9%, 8.5% and 5.4%, respectively.

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Meritage Corporation (MTH) : Free Stock Analysis Report
 
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