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KB Home (KBH) Set to Report Q2 Earnings: What to Expect

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KB Home (KBH - Free Report) is slated to report second-quarter fiscal 2020 results on Jun 23, after market close.

In the last reported quarter, its earnings topped the Zacks Consensus Estimate by 17.2% and grew 61.9% from the year-ago period. Notably, the company's earnings topped analysts’ expectations in 20 of the trailing 21 quarters. However, its top line missed the consensus mark by 5.3% but improved 6.1% year over year.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate has increased 0.8% over the past 30 days to $1.29 per share. This indicates a 134.6% increase from the year-ago earnings of 55 cents per share. The consensus estimate for revenues is pegged at $1.48 billion, suggesting a rise of 61.4% from the prior-year quarter.

KB Home Price and EPS Surprise

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 improved in the fiscal second quarter from the year-ago level on higher deliveries, as lower borrowing costs, improved economy, more governmental stimulus and vaccination drive have been encouraging buyers.

The Zacks Consensus Estimate for the company’s Homebuilding revenues — including housing and land — is pegged at $1,473 million, which indicates an increase of 38.2% from the year-ago period. Within Homebuilding, the consensus mark for housing revenues is $1,471 million, indicating a rise of 38.1% from the prior-year period. The same for land revenues is pegged at $3 million, indicating growth from $0.3 million a year ago. The consensus estimate for average selling price is $405K, indicating growth from $364K reported a year ago. The consensus estimate for homes delivered is pegged at 3,652 units, suggesting growth of 46.1% from the year-ago level.

The consensus mark for Financial Services indicates growth of 29.6% year over year.

Orders & Backlogs: The company’s solid backlog level and new order wins, which are key indicators of significant growth opportunities, bode well. Per the preliminary quarter-to-date net orders for second-quarter fiscal 2021, published on May 25, net orders were 3,961 through May 21, representing an increase of 155% year over year.

The consensus estimate for new orders is currently pegged at 3,956 units, suggesting a 125% year-over-year jump. The same for backlog is 9,695 units, implying notable growth from 5,080 units reported in the prior year.

Margins: Higher average sales and strong demand are likely to have expanded margins in the to-be-reported quarter. Although higher material and labor costs are likely to have put pressure on the bottom line, its initiatives like Returns-Focused Growth Plan, Built-to-Order approach, and aggressive investments in land acquisition as well as development are likely to have somewhat offset those headwinds.

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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: The Earnings ESP for KB Home is +1.87%. 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 #2.

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Floor & Decor Holdings, Inc. (FND - Free Report) has an Earnings ESP of +9.92% and a Zacks Rank #2.

Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +8.88% and holds a Zacks Rank #3.

PGT Innovations, Inc. (PGTI - Free Report) has an Earnings ESP of +7.14% and a Zacks Rank #2.

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