CNBC’s Jim Cramer on Monday reviewed recent earnings from two major homebuilding companies, Lennar and KB Home, saying he feels good about the sector as a whole even though Wall Street favored the latter last week.
“Even though Lennar went down and KB Home went up after both reported last week, I’m pretty positive on both stories, and the homebuilders more generally,” Cramer said. “While this should theoretically be a tough space if rates stay higher for longer, the housing shortage hasn’t gone anywhere.”
Wall Street seems unsure of how to treat these stocks, Cramer said, as they started the year strong when investors thought several rate cuts were on the horizon. But the group has stalled as the Federal Reserve continues to hold interest rates steady.
Both Lennar and KB Home managed to beat Wall Street’s expectations, but Cramer said investors were concerned about Lennar’s mixed guidance and that management mentioned “increased sales incentives.” He added that some may also be wary of Lennar’s proposed spinoff, as it could indicate the company is less bullish about housing demand.
Meanwhile, KB Home raised its full-year outlook for housing revenue, and Cramer noted that the company did not spend a lot of time discussing the need for sales incentives to drive business.
Cramer said he likes KB Home and feels “more sanguine” about Lennar than Wall Street, adding the two are using two different strategies. Cramer said KB Home is “more interested in holding the line on pricing than it is on growing deliveries” — in other words, the company is less worried about having excess inventory. But Lennar is more focused on preventing an inventory glut, Cramer said, and pointed out that the company is seeing significant increases in deliveries and orders.
“If we get any relief on the interest rate front, Lennar’s results suggest that could bring in a new wave of buyers, which is why I think this housing bull market is far from over,” he said.
Lennar and KB Home did not immediately respond to requests for comment.
