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KB Home's Q2 Earnings & Revenues Beat Estimates, Stock Up
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Key Takeaways
KBH beat Q2 EPS and revenue estimates, though both declined year over year.
Lower net orders and affordability issues led KBH to reduce full-year revenue and margin guidance.
Q2 home deliveries dropped 11% while backlog value fell 27% from the prior-year quarter.
KB Home (KBH - Free Report) stock surged 3% after it reported second-quarter fiscal 2025 results. The quarter’s earnings and total revenues surpassed the Zacks Consensus Estimate. However, both metrics decreased on a year-over-year basis.
The quarter’s result reflects the softness in the housing market as homebuyers are still navigating through affordability concerns due to high mortgage rates. Owing to these market uncertainties and a lower net orders level at the end of the quarter, the company lowered its fiscal 2025 guidance.
Nonetheless, the company is focusing on reducing build times and construction costs as it continues to navigate the current environment. Although market conditions have softened, KBH remains focused on managing assets efficiently. Going forward, the company aims to maintain pricing clarity, enhance buyer value, and support margins and returns.
KBH’s Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $1.5, beating the Zacks Consensus Estimate of $1.45 by 3.5%. In the year-ago quarter, it reported an adjusted EPS of $2.15. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Total revenues of $1.53 billion also beat the consensus mark of $1.495 billion by 2.3%, but dropped 10.5% on a year-over-year basis.
KB Homes’ Segmental Details
Homebuilding: The segment's revenues of $1.525 billion declined 10.4% from the prior-year quarter’s level of $1.702 billion. The number of homes delivered was 3,120 units, down 11% from the year-ago period’s level of 3,523 units. The reported figure was up from our projection of 3,087 units for the quarter. The ASP increased 1.2% from a year ago to $488,700. Our model predicted deliveries’ ASP to be $488,400.
Net orders declined 13% from the prior year to 3,460 units. The value of net orders was also down to $1.611 billion from the year-ago quarter’s value of $2.032 billion. We projected orders to be 3,884 units or $1.899 billion for the fiscal second quarter. Absorption or monthly net orders per community decreased to 4.5 from 5.5.
The cancellation rate, as a percentage of gross orders, was 16% compared with 13% in the year-ago period.
The quarter-end backlog totaled 4,776 homes, down from the year-ago figure of 6,270 homes. Further, potential housing revenues from the backlog declined 27% from the prior-year period to $2.288 billion.
The average community count was up 5% to 254 and the ending community count rose 2% year over year to 253.
Within homebuilding, the housing gross margin (excluding inventory-related charges) contracted 150 basis points (bps) year over year to 19.7%. This downtrend was caused by lower price, higher relative land costs and homebuyer concessions, along with reduced operating leverage. Our model anticipated the housing gross margin to be 19.2% for the quarter.
In the quarter, selling, general and administrative expenses (SG&A), as a percentage of housing revenues, expanded 60 bps to 10.7%.
Homebuilding’s operating margin (excluding inventory-related charges) was 9%, down from 11.1%, owing to lower housing gross margin and reduced operating leverage. We expected the operating margin to be 8.5% for the reported quarter.
Financial Services: The segment's revenues declined 41.3% year over year to $4.9 million. The pre-tax income was $8.2 million, down 38.5% from a year ago. The downtrend was due to a lower insurance commissions revenues and equity in income of the company’s mortgage banking joint venture.
KB Home’s Financial Position
KB Home had cash and cash equivalents of $308.9 million as of May 31, 2025, down from $598 million reported at the end of fiscal 2024. The company had a total liquidity of $1.19 billion, including $881.7 million of available capacity under the unsecured revolving credit facility, with $200 million of cash borrowings outstanding.
As of the end of second-quarter fiscal 2025, the debt-to-capital ratio was 32.2, up from 29.4 at fiscal 2024-end.
In the quarter, KBH repurchased 3,734,675 shares of its outstanding common stock for $200 million (or $53.55 per share). As of May 31, 2025, it had $450 million in stock remaining under the repurchase authorization.
KB Homes Lowers Fiscal 2025 Guidance
For fiscal 2025, the company now expects housing revenues to be in the $6.30-$6.5 billion band (compared with prior expectations of $6.6-$7 billion). ASP is currently estimated to be in the range of $480,000-$490,000 compared with the prior expected range of $480,000-$495,000. In fiscal 2024, KBH reported housing revenues of $6.9 billion with an ASP of $486,900.
Assuming no inventory-related charges, the housing gross margin is now expected to be between 19% and 19.4% compared with the prior expected range of 19.2-20%. Last year, the company reported a housing gross margin of 21%. Homebuilding's operating margin (assuming no inventory-related charges) is now expected to be between 8.6% and 9%, down from the prior expectation of around 9.4% and 11.5% reported in fiscal 2024.
SG&A expenses, as a percentage of housing revenues, are now likely to be in the range of 10.2-10.6% (compared with the prior expected range of 10-10.4%). In fiscal 2024, SG&A expenses, as a percentage of housing revenues, were 10%.
It projects an effective tax rate of approximately 24%. The company still expects the ending community count to be within 250.
The company delivered a trailing four-quarter earnings surprise of 8.9%, on average. The stock has increased 25% in the past year. The Zacks Consensus Estimate for AECOM’s fiscal 2025 sales and EPS implies an increase of 13.9% and 5.6%, respectively, from a year ago.
EMCOR currently holds a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 22.8%, on average. The stock has increased 30.7% in the past year.
The consensus estimate for EMCOR’s 2025 sales and EPS implies an increase of 12.7% and 9.6%, respectively, from a year ago.
Gibraltar currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 3.1%, on average. The stock has lost 12.2% in the past year.
The Zacks Consensus Estimate for Gibraltar‘s 2025 sales and EPS implies an increase of 9.3% and 15.8%, respectively, from a year ago.
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KB Home's Q2 Earnings & Revenues Beat Estimates, Stock Up
Key Takeaways
KB Home (KBH - Free Report) stock surged 3% after it reported second-quarter fiscal 2025 results. The quarter’s earnings and total revenues surpassed the Zacks Consensus Estimate. However, both metrics decreased on a year-over-year basis.
The quarter’s result reflects the softness in the housing market as homebuyers are still navigating through affordability concerns due to high mortgage rates. Owing to these market uncertainties and a lower net orders level at the end of the quarter, the company lowered its fiscal 2025 guidance.
Nonetheless, the company is focusing on reducing build times and construction costs as it continues to navigate the current environment. Although market conditions have softened, KBH remains focused on managing assets efficiently. Going forward, the company aims to maintain pricing clarity, enhance buyer value, and support margins and returns.
KBH’s Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $1.5, beating the Zacks Consensus Estimate of $1.45 by 3.5%. In the year-ago quarter, it reported an adjusted EPS of $2.15. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
KB Home Price, Consensus and EPS Surprise
KB Home price-consensus-eps-surprise-chart | KB Home Quote
Total revenues of $1.53 billion also beat the consensus mark of $1.495 billion by 2.3%, but dropped 10.5% on a year-over-year basis.
KB Homes’ Segmental Details
Homebuilding: The segment's revenues of $1.525 billion declined 10.4% from the prior-year quarter’s level of $1.702 billion. The number of homes delivered was 3,120 units, down 11% from the year-ago period’s level of 3,523 units. The reported figure was up from our projection of 3,087 units for the quarter. The ASP increased 1.2% from a year ago to $488,700. Our model predicted deliveries’ ASP to be $488,400.
Net orders declined 13% from the prior year to 3,460 units. The value of net orders was also down to $1.611 billion from the year-ago quarter’s value of $2.032 billion. We projected orders to be 3,884 units or $1.899 billion for the fiscal second quarter. Absorption or monthly net orders per community decreased to 4.5 from 5.5.
The cancellation rate, as a percentage of gross orders, was 16% compared with 13% in the year-ago period.
The quarter-end backlog totaled 4,776 homes, down from the year-ago figure of 6,270 homes. Further, potential housing revenues from the backlog declined 27% from the prior-year period to $2.288 billion.
The average community count was up 5% to 254 and the ending community count rose 2% year over year to 253.
Within homebuilding, the housing gross margin (excluding inventory-related charges) contracted 150 basis points (bps) year over year to 19.7%. This downtrend was caused by lower price, higher relative land costs and homebuyer concessions, along with reduced operating leverage. Our model anticipated the housing gross margin to be 19.2% for the quarter.
In the quarter, selling, general and administrative expenses (SG&A), as a percentage of housing revenues, expanded 60 bps to 10.7%.
Homebuilding’s operating margin (excluding inventory-related charges) was 9%, down from 11.1%, owing to lower housing gross margin and reduced operating leverage. We expected the operating margin to be 8.5% for the reported quarter.
Financial Services: The segment's revenues declined 41.3% year over year to $4.9 million. The pre-tax income was $8.2 million, down 38.5% from a year ago. The downtrend was due to a lower insurance commissions revenues and equity in income of the company’s mortgage banking joint venture.
KB Home’s Financial Position
KB Home had cash and cash equivalents of $308.9 million as of May 31, 2025, down from $598 million reported at the end of fiscal 2024. The company had a total liquidity of $1.19 billion, including $881.7 million of available capacity under the unsecured revolving credit facility, with $200 million of cash borrowings outstanding.
As of the end of second-quarter fiscal 2025, the debt-to-capital ratio was 32.2, up from 29.4 at fiscal 2024-end.
In the quarter, KBH repurchased 3,734,675 shares of its outstanding common stock for $200 million (or $53.55 per share). As of May 31, 2025, it had $450 million in stock remaining under the repurchase authorization.
KB Homes Lowers Fiscal 2025 Guidance
For fiscal 2025, the company now expects housing revenues to be in the $6.30-$6.5 billion band (compared with prior expectations of $6.6-$7 billion). ASP is currently estimated to be in the range of $480,000-$490,000 compared with the prior expected range of $480,000-$495,000. In fiscal 2024, KBH reported housing revenues of $6.9 billion with an ASP of $486,900.
Assuming no inventory-related charges, the housing gross margin is now expected to be between 19% and 19.4% compared with the prior expected range of 19.2-20%. Last year, the company reported a housing gross margin of 21%. Homebuilding's operating margin (assuming no inventory-related charges) is now expected to be between 8.6% and 9%, down from the prior expectation of around 9.4% and 11.5% reported in fiscal 2024.
SG&A expenses, as a percentage of housing revenues, are now likely to be in the range of 10.2-10.6% (compared with the prior expected range of 10-10.4%). In fiscal 2024, SG&A expenses, as a percentage of housing revenues, were 10%.
It projects an effective tax rate of approximately 24%. The company still expects the ending community count to be within 250.
KBH’s Zacks Rank
KB Home currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks from the Construction sector are AECOM (ACM - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) .
AECOM presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company delivered a trailing four-quarter earnings surprise of 8.9%, on average. The stock has increased 25% in the past year. The Zacks Consensus Estimate for AECOM’s fiscal 2025 sales and EPS implies an increase of 13.9% and 5.6%, respectively, from a year ago.
EMCOR currently holds a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 22.8%, on average. The stock has increased 30.7% in the past year.
The consensus estimate for EMCOR’s 2025 sales and EPS implies an increase of 12.7% and 9.6%, respectively, from a year ago.
Gibraltar currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 3.1%, on average. The stock has lost 12.2% in the past year.
The Zacks Consensus Estimate for Gibraltar‘s 2025 sales and EPS implies an increase of 9.3% and 15.8%, respectively, from a year ago.