KB Home is currently a risky stock to buy despite its low price, evidenced by the company’s own disinterest in purchasing its stock, CNBC’s Jim Cramer said Monday.
“If KB starts buying back its stock aggressively, I’ll be right there with them. If they don’t, I’m staying on the sidelines,” the “Mad Money” host said. KB Home CEO Jeffrey Mezger said on the company’s first-quarter earnings call on March 23 that the company will “navigate based on our operating needs” when asked why KB Home isn’t purchasing its own stock.
KB Home’s earnings and top line missed Wall Street expectations in its first-quarter results, leading the stock to plummet from around $38 to about $33.
The homebuilding company’s stock inched up 0.42% on Monday after it dropped to a new 52-week low earlier in the day. Wolfe Research downgraded KB Home from outperform to peer perform in the morning.
While KB Home stock’s low price might be enticing to investors, Cramer said it is a red flag.
“The homebuilders are cyclical stocks that rise and fall with the broader economy. Cyclicals get this cheap when Wall Street’s worried about the earnings estimates,” he said.
Cramer also expressed concern about 30-year U.S. Treasury bonds yields, which have risen to their highest level since mid-2019. The yield changes are “the most important benchmark for mortgage rates and a hawkish Federal Reserve will only push it higher,” he said.
The Federal Reserve is expected to take several interest rate hikes this year after approving a quarter-percentage-point interest rate in March, with some traders expecting more aggressive increases after Fed Chair Jay Powell vowed earlier this month to take a strong stance against soaring inflation.
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