Fitch changes KB Home outlook to positive

Fitch Ratings said it has affirmed KB Home's BB+ senior unsecured debt and BB- senior subordinated debt ratings and changed the outlook to positive from stable.

Fitch said the change reflects KB Home's solid, consistent profit performance in recent years and the expectation that the company's credit profile will continue to improve as it executes its business model and embarks on a new period of growth.

The ratings also consider the company's primary focus on entry-level and first-step trade-up housing (the deepest segments of the market), its conservative building practices, and effective use of return on invested capital criteria as a key element of its operating model.

Fitch noted the company has expanded EBITDA margins over the past several years on steady price increases, volume improvements and reductions in selling, general and administrative expenses. Also, KB Home has produced record levels of home closings, orders and backlog as the housing cycle extended its upward momentum.

Balance sheet liquidity has continued to improve due to efforts to reduce long-dated inventories, quicken inventory turns and improve returns on capital, the agency said. Progress in these areas has allowed the company to accelerate deliveries without excessively burdening the balance sheet.

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