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What Investors Should Expect From KB Home (KBH) Q3 Earnings
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KB Home (KBH - Free Report) is slated to report third-quarter fiscal 2020 results (ended Aug 31) on Sep 22, after market close.
In the last reported quarter, its earnings topped the Zacks Consensus Estimate by 16.3% and grew 173% from the year-ago period. The company's earnings topped analysts’ expectations in 21 of the trailing 22 quarters. Its top line also topped the consensus mark by 2.3% and improved 57.7% year over year.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate has been unchanged over the past 30 days at $1.60 per share. This indicates a 92.8% increase from the year-ago earnings of 83 cents per share. The consensus estimate for revenues is pegged at $1.56 billion, suggesting a rise of 56.2% from the prior-year quarter.
Revenues: KB Home is expected to have generated increased housing revenues in the fiscal third quarter from the year-ago level on the back of 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 $1,557 million, which indicates an increase of 56.5% from the year-ago period. Within Homebuilding, the consensus mark for housing revenues is $1,555 million, indicating a rise of 58.8% from the prior-year period. The same for land revenues is pegged at $2.25 million, indicating a decline from $16 million a year ago.
Also, higher pricing will be a major contributing factor. The consensus estimate for average selling price (ASP) is $421,000, indicating growth from $385,000 reported a year ago. For the quarter, the company expects ASP of $420,000, indicating an increase from $384,700 reported a year ago.
The consensus estimate for homes delivered is pegged at 3,712 units, suggesting growth of 45.9% from the year-ago level. It expects housing revenues in the range of $1.5-$1.58 billion, indicating an increase from $995.1 million a year ago.
Backlogs & Orders: The company’s solid backlog level, which is a key indicator of significant growth opportunities, bodes well. The same for backlog is 10,135 units, implying notable growth from 6,749 units reported in the prior year.
The consensus estimate for new orders is currently pegged at 3,813 units, suggesting a 9.5% year-over-year decline.
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.
The company expects homebuilding operating income margin (excluding the impact of any inventory-related charges) to improve 11.7-12.1% for the quarter, suggesting an increase from 9.6% a year ago. Assuming no inventory-related charges, KB Home expects a sequential increase in fiscal third-quarter housing gross margin to 21.7% and a further improvement in the same in the fourth quarter. SG&A expense ratio will be approximately 9.8%.
What Our Model Indicates
Our proven model does not conclusively predict an earnings beat for KB Home this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of +1.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Currently, KB Home carries a Zacks Rank #4 (Sell).
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.
Aspen Aerogels, Inc. (ASPN - Free Report) has an Earnings ESP of +2.60% and holds a Zacks Rank #3.
Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +3.55% and a Zacks Rank #2.
ChampionX Corporation (CHX - Free Report) has an Earnings ESP of +6.74% and a Zacks Rank #3.
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What Investors Should Expect From KB Home (KBH) Q3 Earnings
KB Home (KBH - Free Report) is slated to report third-quarter fiscal 2020 results (ended Aug 31) on Sep 22, after market close.
In the last reported quarter, its earnings topped the Zacks Consensus Estimate by 16.3% and grew 173% from the year-ago period. The company's earnings topped analysts’ expectations in 21 of the trailing 22 quarters. Its top line also topped the consensus mark by 2.3% and improved 57.7% year over year.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate has been unchanged over the past 30 days at $1.60 per share. This indicates a 92.8% increase from the year-ago earnings of 83 cents per share. The consensus estimate for revenues is pegged at $1.56 billion, suggesting a rise of 56.2% from the prior-year quarter.
KB Home Price and EPS Surprise
KB Home price-eps-surprise | KB Home Quote
Factors at Play
Revenues: KB Home is expected to have generated increased housing revenues in the fiscal third quarter from the year-ago level on the back of 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 $1,557 million, which indicates an increase of 56.5% from the year-ago period. Within Homebuilding, the consensus mark for housing revenues is $1,555 million, indicating a rise of 58.8% from the prior-year period. The same for land revenues is pegged at $2.25 million, indicating a decline from $16 million a year ago.
Also, higher pricing will be a major contributing factor. The consensus estimate for average selling price (ASP) is $421,000, indicating growth from $385,000 reported a year ago. For the quarter, the company expects ASP of $420,000, indicating an increase from $384,700 reported a year ago.
The consensus estimate for homes delivered is pegged at 3,712 units, suggesting growth of 45.9% from the year-ago level. It expects housing revenues in the range of $1.5-$1.58 billion, indicating an increase from $995.1 million a year ago.
Backlogs & Orders: The company’s solid backlog level, which is a key indicator of significant growth opportunities, bodes well. The same for backlog is 10,135 units, implying notable growth from 6,749 units reported in the prior year.
The consensus estimate for new orders is currently pegged at 3,813 units, suggesting a 9.5% year-over-year decline.
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.
The company expects homebuilding operating income margin (excluding the impact of any inventory-related charges) to improve 11.7-12.1% for the quarter, suggesting an increase from 9.6% a year ago. Assuming no inventory-related charges, KB Home expects a sequential increase in fiscal third-quarter housing gross margin to 21.7% and a further improvement in the same in the fourth quarter. SG&A expense ratio will be approximately 9.8%.
What Our Model Indicates
Our proven model does not conclusively predict an earnings beat for KB Home this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of +1.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Currently, KB Home carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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.
Aspen Aerogels, Inc. (ASPN - Free Report) has an Earnings ESP of +2.60% and holds a Zacks Rank #3.
Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +3.55% and a Zacks Rank #2.
ChampionX Corporation (CHX - Free Report) has an Earnings ESP of +6.74% and a Zacks Rank #3.