KB Home (KBH) stock is notably lower Wednesday after the homebuilder reported mixed results for its fiscal third quarter and updated its full-year outlook.
In the three months ended August 31, KB Home's revenue increased 10.4% to $1.75 billion, as its home deliveries rose 7.6% year-over-year to 3,631 and its average selling price jumped 3.1% to $480,900.
The company also said earnings per share (EPS) were up 13.3% from the year-ago period to $2.04.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"In the third quarter, we achieved strong year-over-year growth in both revenues and diluted earnings per share," said KB Home CEO Jeffrey Mezger in a statement. The executive added that the homebuilder "experienced variability in demand across the quarter, with softening in late June through July, as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising."
Metzger said that he is "encouraged" by a strengthening in demand the company saw in August as mortgage rates moderated.
KB Home's results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $1.73 billion and earnings of $2.06 per share, according to MarketWatch.
The company also updated its full-year outlook. KBH now anticipates revenue in the range of $6.85 billion to $6.95 billion, an average selling price of approximately $490,000 and a housing gross profit margin that's between 21.1% to 21.2%.
This compares with its previous outlook of revenue in the range of $6.7 billion to $6.9 billion, an average selling price of $485,000 to $495,000 and a gross profit margin of 21.1% to 21.5%.
The weakness in KBH's share price Wednesday could be due to the revised housing gross profit margin expectations, which impacted competitor Lennar's (LEN) stock last week following its earnings release.
Is KB Home stock a buy, sell or hold?
KB Home has outperformed the broad market in 2024, up 41% on a total return basis (price change plus dividend) vs the S&P 500's 21% gain. Still, Wall Street is on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for KBH stock is $81.23, representing a discount of about 3% to current levels. Meanwhile, the consensus recommendation is Hold.
Financial services firm Wedbush raised its price target on KBH stock to $75 from $67 after earnings, but maintained its Neutral rating (equivalent to a Hold).
The price-target hike comes amid the shift to a fiscal 2025 valuation from a fiscal 2024 one, says Wedbush analyst Jay McCanless. "Fiscal third-quarter order growth was less than we expected due to year-over-year declines in KB's Southwest and Southeast segments," he adds, while noting that the company cut prices early in Q3 to maintain sales pace, which likely put pressure on the bottom line.
"On a positive note, KB indicated traffic and sales absorption improved in sync with lower mortgage rates through August and into September," McCanless says.
Related Content
-
Stocks Swing Lower as Eli Lilly, Fortinet Spiral: Stock Market TodayThe main indexes finished well off their session highs after a disappointing batch of corporate earnings reports.
-
Are You Leaving Money on the Table? Four Strategies to Free Up Stuck InvestmentsFrom forgotten 401(k)s to outdated asset allocations, here’s how stuck money can hurt your retirement.
-
A Taxable Brokerage Account May Be What Your Retirement Is MissingYou can supplement your retirement nest egg or save for other goals with a taxable brokerage account.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
Five Things to Do if You're Forced Into Early Retirement (and How to Reset and Recover)Developing a solid retirement plan — before a layoff — can help you to adapt to unexpected changes in your timeline. Once the initial panic eases, you can confidently reimagine what's next.
-
Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert GuideEconomic uncertainty, global events and increasing wealth are shaping the charitable landscape this year. Here are the philanthropic trends and some tips that could help affluent donors optimize their impact.
-
Stocks Rally on Apple Strength: Stock Market TodayThe iPhone maker will boost its U.S. investment by $100 billion, which sent the Dow Jones stock soaring.
-
What to Know About Multisector ETFsMultisector bond funds allow investors to pick and choose among a wide array of assets.
