Homebuilding concern KB Home (NYSE:KBH) is enjoying an impressive day of gains, up 22.2% at $19.08 this afternoon following an upgrade to "overweight" from "sector weight" from KeyBanc. The analyst maintained its $25 price target. KeyBanc's bull note comes right ahead of KBH's first-quarter earnings report, which is due out after the close tomorrow, March 26.
Coming into today, sentiment surrounding KB Home was split. Seven of the 13 in coverage called the security a "buy" or better, while the remaining six said "hold." On the other hand, the consensus 12-month target price of $36.57 is a lofty 89.6% premium to current levels.
The options pits are brimming with bullish activity ahead of the homebuilder's quarterly confessional. So far, 3,297 calls have exchanged hands -- three times what is typically seen at this point -- compared to just 833 puts. the April 23 call is the most popular, followed by the July 35 call, with positions being opened at the former.
From a historical perspective, KBH tends to do well after earnings. The equity was positive during five of its last eight post-earnings sessions, averaging a 4% swing, regardless of direction. This time around, the options pits are pricing in a much bigger next day move of 25.1%.