The end of the year is also the end of the fourth quarter. That means earnings season is about to get started. Next week is dominated by major banks releasing their results on Friday. They include powerhouse names like Bank of America Corporation (BAC), Citigroup Inc. (C), and JPMorgan Chase & Co. (JPM).
However, the name that interests us the most is KB Home (KBH). They operate as a homebuilding company in the United States. KB builds and sells attached and detached single-family residential homes, townhomes, and condominiums primarily for first-time, first move-up, second move-up, and active adult homebuyers.
An interesting dynamic is in play for the housing market. New home sales increased in November by 5.8 percent. (1) Meanwhile, existing home sales dropped for the sixth month in a row (2), and housing starts were down a half percent. (3)
KB is trading at nearly a three-month high heading into next Wednesday’s fourth-quarter earnings release. Analysts expect the company to report consensus earnings per share (EPS) of $2.87 after the market close.
The trend higher into earnings created a classic golden crossover where the 50-day moving average moved from below to above the 200-day moving average. This is considered bullish by many chart watchers. Simultaneously, the homebuilder’s chart exhibits another technical buy signal with a bullish MACD crossover. All these positives have KBH on the verge of bursting through price resistance between $34-$35.
A strong earnings announcement with robust 2023 guidance, could move KBH’s price beyond resistance and take the stock toward $38. One the B side, an unwelcome forward outlook might sink shares to where the 50- and 200-day averages meet at $30.54.
The current signal set suggests Wall Street anticipates a positive announcement Wednesday afternoon. Just remember that trading earnings is risky and only for speculative investors who can afford to lose money in short order.
KBH has a pair of technical buy signals with bullish crossovers.
A better-than-expected earnings report could push KBH to the green line, bad numbers could move the stock down to the 50- and 200-day averages.
Rich Meyers
Investing Trends
1 – https://www.reuters.com/markets/us/us-new-home-sales-increase-again-november-2022-12-23/
2 – https://www.nar.realtor/newsroom/existing-home-sales-dipped-7-7-in-november
3 – https://www.cnn.com/2022/12/20/homes/new-home-construction-november/index.html
