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In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 38.1% and 5.9%, respectively. On a year-over-year basis, both metrics decreased.
The company’s earnings topped analysts’ expectations in 26 of the trailing 29 quarters.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings has increased to $1.24 per share from $1.19 in the past seven days. However, the projected figure indicates a 46.6% decrease from the year-ago quarter’s earnings of $2.32 per share. The consensus estimate for revenues is pegged at $1.39 billion, suggesting a decline of 19.3% from the prior-year quarter’s levels.
Revenues: KB Home’s housing revenues are expected to have decreased in the fiscal second quarter from a year ago, thanks to high mortgage rates, persistent inflation, along with the uncertain economy.
Owing to a softer demand environment due to challenging macroeconomic and geopolitical conditions, the company expects housing revenues in the range of $1.35-$1.50 billion compared with the year-ago figure of $1.71 billion. KBH anticipates the average selling price or ASP to be $480,000, suggesting a decline from $494,300 reported a year ago. The company expects average community count improvement in the range of 15%-20%.
We expect housing revenues to decrease 18% year over year to $1.41 billion in the quarter. We expect ASP to decrease 2.9% to $480,100 in the quarter.
We expect home deliveries to be 2,929 units, suggesting a decline from the year-ago quarter’s level of 3,469 units.
Margins: Although higher material and labor costs are likely to have put pressure on the bottom line, initiatives like the Returns-Focused Growth Plan and Built-to-Order approach are likely to have somewhat offset those headwinds.
The company expects the homebuilding operating margin (assuming no inventory-related charges) to be between 9.5% and 10.5%. This compares unfavorably with the year-ago figure of 15.4%.
Assuming no inventory-related charges, KB Home expects fiscal second-quarter housing gross margin in the range of 20-21% versus 25.3% reported a year ago. Selling, general & administrative expenses, as a percentage of housing revenues, are likely to be in the range of 10.3%-10.8% (up from the year-ago figure of 9.8%). It projects an effective tax rate of approximately 24%.
Orders & Backlogs: We expect the backlog to be 7,102 units, implying a notable fall from 12,331 units reported in the prior year. Also, new orders are expected to decline 23% to 3,015 units, given the challenging market conditions.
What Our Model Indicates
Our proven model predicts an earnings beat for KB Home this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is exactly the case here.
Earnings ESP: KB Home has an Earnings ESP of +5.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: KB Home currently has a Zacks Rank #3.
Other Stocks With Favorable Combination
Here are some companies in the Zacks Construction sector, which according to our model, also have the right combination of elements to post an earnings beat for their respective quarters to be reported.
MDC is expected to register a 74.1% decline in earnings for the to-be-reported quarter. Notably, MDC reported better-than-expected earnings in two of the last four quarters and missed on other two occasions, with the average surprise being 27.8%.
PulteGroup (PHM - Free Report) has an Earnings ESP of +0.53% and sports a Zacks Rank #1.
PHM’s earnings for the to-be-reported quarter are expected to decline 10.6%. The company reported better-than-expected earnings in three of the last four quarters and missed on other one occasion, with the average surprise being 15.6%.
Tri Pointe Homes, Inc. (TPH - Free Report) has an Earnings ESP of +9.76% and a Zacks Rank #2.
TPH’s earnings for the to-be-reported quarter are expected to decline 58.7%. The company reported better-than-expected earnings in all the last four quarters, with the average surprise being 37.1%.
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Here's What to Expect From KB Home (KBH) in Q2 Earnings
KB Home (KBH - Free Report) is slated to report second-quarter fiscal 2023 results (ended May 31) on Jun 21, after market close.
In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 38.1% and 5.9%, respectively. On a year-over-year basis, both metrics decreased.
The company’s earnings topped analysts’ expectations in 26 of the trailing 29 quarters.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings has increased to $1.24 per share from $1.19 in the past seven days. However, the projected figure indicates a 46.6% decrease from the year-ago quarter’s earnings of $2.32 per share. The consensus estimate for revenues is pegged at $1.39 billion, suggesting a decline of 19.3% from the prior-year quarter’s levels.
KB Home Price and EPS Surprise
KB Home price-eps-surprise | KB Home Quote
Factors at Play
Revenues: KB Home’s housing revenues are expected to have decreased in the fiscal second quarter from a year ago, thanks to high mortgage rates, persistent inflation, along with the uncertain economy.
Owing to a softer demand environment due to challenging macroeconomic and geopolitical conditions, the company expects housing revenues in the range of $1.35-$1.50 billion compared with the year-ago figure of $1.71 billion. KBH anticipates the average selling price or ASP to be $480,000, suggesting a decline from $494,300 reported a year ago. The company expects average community count improvement in the range of 15%-20%.
We expect housing revenues to decrease 18% year over year to $1.41 billion in the quarter. We expect ASP to decrease 2.9% to $480,100 in the quarter.
We expect home deliveries to be 2,929 units, suggesting a decline from the year-ago quarter’s level of 3,469 units.
Margins: Although higher material and labor costs are likely to have put pressure on the bottom line, initiatives like the Returns-Focused Growth Plan and Built-to-Order approach are likely to have somewhat offset those headwinds.
The company expects the homebuilding operating margin (assuming no inventory-related charges) to be between 9.5% and 10.5%. This compares unfavorably with the year-ago figure of 15.4%.
Assuming no inventory-related charges, KB Home expects fiscal second-quarter housing gross margin in the range of 20-21% versus 25.3% reported a year ago. Selling, general & administrative expenses, as a percentage of housing revenues, are likely to be in the range of 10.3%-10.8% (up from the year-ago figure of 9.8%). It projects an effective tax rate of approximately 24%.
Orders & Backlogs: We expect the backlog to be 7,102 units, implying a notable fall from 12,331 units reported in the prior year. Also, new orders are expected to decline 23% to 3,015 units, given the challenging market conditions.
What Our Model Indicates
Our proven model predicts an earnings beat for KB Home this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is exactly the case here.
Earnings ESP: KB Home has an Earnings ESP of +5.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: KB Home currently has a Zacks Rank #3.
Other Stocks With Favorable Combination
Here are some companies in the Zacks Construction sector, which according to our model, also have the right combination of elements to post an earnings beat for their respective quarters to be reported.
M.D.C. Holdings, Inc. has an Earnings ESP of +20.18% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
MDC is expected to register a 74.1% decline in earnings for the to-be-reported quarter. Notably, MDC reported better-than-expected earnings in two of the last four quarters and missed on other two occasions, with the average surprise being 27.8%.
PulteGroup (PHM - Free Report) has an Earnings ESP of +0.53% and sports a Zacks Rank #1.
PHM’s earnings for the to-be-reported quarter are expected to decline 10.6%. The company reported better-than-expected earnings in three of the last four quarters and missed on other one occasion, with the average surprise being 15.6%.
Tri Pointe Homes, Inc. (TPH - Free Report) has an Earnings ESP of +9.76% and a Zacks Rank #2.
TPH’s earnings for the to-be-reported quarter are expected to decline 58.7%. The company reported better-than-expected earnings in all the last four quarters, with the average surprise being 37.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.