KB Home (KBH) is set to release its third-quarter fiscal 2014 results on Sep 24, before the market opens. Last quarter, it posted a solid positive surprise of 28.57%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

KB Home has been posting solid earnings and revenue results in the past few quarters. The company’s net orders have rebounded strongly in the first half of 2014 from a rather softer trend in second half of 2013. This positive order trend is expected to continue in the upcoming quarter as the company has been aggressively investing in land and lots in the recent past and also improving its community count. 

In addition, the company has strong pricing power as it shifted its product mix towards higher priced homes. This also leads to strong margins. These positive trends are likely to continue in the upcoming quarter.

KB Home expects gross margins to continue to improve during the rest of fiscal 2014 and expects to meet the target of 20% in 2014.

However, KB Home has been witnessing declining number of homes closed in the past few quarters. It remains to be seen if the company is able to improve its number of homes closed in the upcoming quarter.    

Earnings Whisper?

Our proven model does not conclusively show that KB Home is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP:  The ESP for KB Home is 0.00%

Zacks Rank #3 (Hold): KB Home carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies that can be considered as our model shows that they have a favorable combination of elements:

The Home Depot, Inc. (HD), Earnings ESP of +0.89% and a Zacks Rank #2 (Buy).

Chicago Bridge & Iron Company N.V. (CBI), Earnings ESP of +3.60% and a Zacks Rank #3

Boise Cascade Company (BCC), Earnings ESP of +7.69% and a Zacks Rank #2.