Why Is KB Home (KBH) Up 1.7% Since Last Earnings Report?

A month has gone by since the last earnings report for KB Home (KBH). Shares have added about 1.7% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is KB Home due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

KBH Q3 Earnings & Revenues Beat Estimates, Both Decline Y/Y

KB Home reported third-quarter fiscal 2025 results. The quarter’s earnings and total revenues surpassed the Zacks Consensus Estimate but decreased on a year-over-year basis.

The company’s quarterly results highlighted ongoing challenges in a difficult housing market, reflecting pricing pressures across key regions. Macroeconomic headwinds such as persistent cost inflation and the impact of tariffs on construction materials. In response to weaker demand and the shortfall in orders, management adopted a cautious stance and revised its fiscal 2025 housing revenue guidance downward.

However, KB Home is focused on expanding its build-to-order mix, reducing build times and enhancing customer satisfaction through affordable prices and personalization while maintaining strict cost controls. With a healthy balance sheet, significant cash flow and capital returns to shareholders, the company is positioning itself for improved margins and long-term growth once market conditions stabilize.

KBH’s Q3 Earnings & Revenue Discussion

The company reported adjusted earnings per share (EPS) of $1.61, beating the Zacks Consensus Estimate of $1.50 by 7.3%. In the year-ago quarter, it reported an adjusted EPS of $2.04.

Revenues of $1.62 billion also surpassed the consensus mark of $1.6 billion by 1.5% but decreased 7.4% year over year.

KB Homes’ Segmental Details

Homebuilding: The segment's revenues of $1.61 billion declined 7.6% from the prior-year quarter’s level of $1.75 billion. The number of homes delivered was 3,393 units, down 6.6% from the year-ago period’s level of 3,631 units. The average selling price (ASP) decreased 1.1% from a year ago to $475,700.

Net orders declined 4.4% from the prior year to 2,950 units. The value of net orders was also down to $1.31 billion from the year-ago quarter’s value of $1.54 billion. Absorption or monthly net orders per community decreased to 3.8 from 4.1 year over year.

The cancellation rate, as a percentage of gross orders, was 17% compared with 15% in the year-ago period.

The quarter-end backlog totaled 4,333 homes, down from the year-ago figure of 5,724 homes. Further, potential housing revenues from the backlog declined 31.9% from the prior-year period to $2 billion.

The average community count was up year over year by 3% to 259, and the ending community count was up 4% to 264.

Within homebuilding, the housing gross margin (excluding inventory-related charges) contracted 180 basis points (bps) year over year to 18.9%. The contraction was primarily driven by pricing reductions, higher relative land costs, and an unfavorable geographic mix, partially offset by lower construction expenses.

In the quarter, selling, general, and administrative expenses (SG&A), as a percentage of housing revenues, contracted 20 bps to 10%, caused by decreased operating leverage.

Homebuilding operating margin (excluding inventory-related charges) was 8.8%, down from 10.9%.

Financial Services: The segment's revenues declined 9.3% year over year to $6 million. The downtrend was due to lower insurance commission revenues and equity in the income of the company’s mortgage banking joint venture.

KB Home’s Financial Position

KB Home had homebuilding cash and cash equivalents of $330.6 million as of Aug. 31, 2025, down from $598 million reported at the end of fiscal 2024. The company had a total liquidity of $1.16 billion, including $831.7 million of available capacity under its revolving credit facility, with $250 million of cash borrowings outstanding.

As of the end of the third-quarter fiscal 2025, the debt-to-capital ratio was 33.2, up from 29.4 at the end of fiscal 2024.

For the nine months, KBH repurchased approximately 7.8 million shares of its outstanding common stock for $438.5 million (or $56.30 per share). As of Aug. 31, 2025, it had $261.5 million remaining under the repurchase authorization.

KB Home Revises FY25 Guidance

For fiscal 2025, the company now expects housing revenues to be in the $6.1-$6.2 billion band (compared with prior expectations of $6.3-$6.5 billion). ASP is currently estimated to be approximately $483,000 compared to the previous range of $480,000 to $490,000. 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 19.2% and 19.3%, compared with the prior range of 19.0% to 19.4%. Last year, the company reported a housing gross margin of 21%. Homebuilding's operating margin (assuming no inventory-related charges) is projected at approximately 8.9% compared to the prior expectation of 8.6-9.0%, indicating a decline from the 11.5% reported in fiscal 2024.

SG&A expenses, as a percentage of housing revenues, are now expected to be in the range of 10.2-10.3%, compared to the prior expected range of 10.2% to 10.6%. In fiscal 2024, SG&A expenses, as a percentage of housing revenues, were 10%.

It projects an effective tax rate of approximately 23% (the prior expectation was 24%). The company increased the ending community count to about 260 (prior expectation was 250).

How Have Estimates Been Moving Since Then?

Estimates review followed a upward path over the past two months.

The consensus estimate has shifted -12.46% due to these changes.

VGM Scores

Currently, KB Home has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

KB Home has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

KB Home is part of the Zacks Building Products - Home Builders industry. Over the past month, Lennar (LEN), a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended August 2025 more than a month ago.

Lennar reported revenues of $8.81 billion in the last reported quarter, representing a year-over-year change of -6.4%. EPS of $2.00 for the same period compares with $3.90 a year ago.

Lennar is expected to post earnings of $2.30 per share for the current quarter, representing a year-over-year change of -42.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Lennar. Also, the stock has a VGM Score of F.

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This article originally published on Zacks Investment Research (zacks.com).

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