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KB Home KBH reported fourth-quarter fiscal 2025 results. The quarter’s earnings and total revenues surpassed the Zacks Consensus Estimate but decreased on a year-over-year basis.
KB Home’s quarterly performance remained under pressure amid a challenging economic and geopolitical environment, with low consumer confidence, affordability concerns and a still-high mortgage rate continuing to constrain demand. In response to these macro headwinds, management has adopted a measured outlook for the first quarter and full fiscal year 2026, underpinned by management’s confidence in its operating strategy and value-driven, transparent build-to-order model.
However, KB Home is focused on sustaining high customer satisfaction, expanding its build-to-order mix, shortening construction cycle times and further reducing direct costs, while maintaining disciplined pacing and pricing to optimize returns. Supported by a strong balance sheet, solid cash flow and ongoing shareholder returns, the company is positioned for margin recovery and long-term growth, with 35 to 40 new community openings expected to enhance margins through a predominantly build-to-order mix.
Following the earnings release, KBH stock declined 4.8% during yesterday’s after-hours.
The company reported adjusted earnings per share (EPS) of $1.92, beating the Zacks Consensus Estimate of $1.79 by 7.3%. In the year-ago quarter, it reported an adjusted EPS of $2.53.
KB Home price-consensus-eps-surprise-chart | KB Home Quote
Total revenues of $1.69 billion also surpassed the consensus mark of $1.65 billion by 2.8% but decreased 15.5% year over year.
Homebuilding: The segment's revenues of $1.686 billion declined 15.4% from the prior-year quarter’s level of $1.993 billion. The number of homes delivered was 3,619 units, down 9% from the year-ago period’s level of 3,978 units. The reported figure was up from our projection of 3,552 units for the quarter. The average selling price (ASP) decreased 7.1% from a year ago to $465,600. Our model predicted deliveries’ ASP to be $462,300.
Net orders declined 10.2% from the prior year to 2,414 units. The value of net orders was also down to $1.1 billion from the year-ago quarter’s value of $1.32 billion. We projected net orders to be 2,727 units or $1.28 billion for the fiscal fourth quarter. Absorption or monthly net orders per community decreased to 3 from 3.5 year over year.
The cancellation rate, as a percentage of gross orders, was 18% compared with 17% in the year-ago period.
The quarter-end backlog totaled 3,128 homes, down from the year-ago figure of 4,434 homes. Further, potential housing revenues from the backlog declined 37.5% from the prior-year period to $1.4 billion.
The average community count was up year over year by 5% to 268, and the ending community count was up 5% to 271.
Within homebuilding, the housing gross margin (excluding inventory-related charges) contracted 310 basis points (bps) year over year to 17.8%. The contraction was primarily driven by pricing reductions, higher relative land costs and an unfavorable geographic mix, partially. Our model anticipated the housing gross margin to be at exactly 17.8% for the quarter.
In the quarter, selling, general and administrative expenses (SG&A), as a percentage of housing revenues, expanded 60 bps to 10%.
Homebuilding operating margin (excluding inventory-related charges) was 7.8%, down from 11.5%. We expected the operating margin to be 8.3% for the reported quarter.
Financial Services: The segment's revenues declined 26.9% year over year to $8.7 million. The pre-tax income was $10.6 million, down 19.1% from a year ago. The downturn reflected reduced equity income from the mortgage banking joint venture, partly offset by increased insurance commission revenues.
KB Home’s total revenues during fiscal 2025 were $6.24 billion, down from $6.93 billion reported in fiscal 2024. Homebuilding revenues decreased to $6.21 billion from $6.9 billion reported a year ago, while EPS declined year over year to $6.15 from $8.45.
KB Home delivered 12,902 homes during the same period, which was down year over year from 14,169 homes reported last year. The average selling price edged down slightly to $481,400 from $486,900.
KB Home had homebuilding cash and cash equivalents of $228.6 million as of Nov. 30, 2025, down from $598 million reported at the end of fiscal 2024. The company had a total liquidity of $1.43 billion, including $1.2 billion of available capacity under its revolving credit facility, with no cash borrowings outstanding.
As of the end of the fourth-quarter fiscal 2025, the debt-to-capital was 30.3%, up from 29.4% at the end of fiscal 2024.
In fiscal 2025, KBH repurchased approximately 9.4 million shares of its outstanding common stock for $538.5 million (or $57.37 per share). As of Nov. 30, 2025, it had $900 million remaining under the repurchase authorization.
For the first quarter of fiscal 2026, the company is expecting housing revenues to be in the $1.05-$1.15 billion band, down from $1.39 billion reported in the year-ago period. It expects deliveries to be in the range of 2,300-2,500 homes compared with 2,770 homes delivered in the year-ago period.
Assuming no inventory-related charges, the housing gross profit margin is expected to be between 15.4% and 16%, down from 20.2% reported in the year-ago period. SG&A expenses, as a percentage of housing revenues, are expected to be in the range of 12.2% to 12.8%, compared with 11% reported in the year-ago period.
KBH projects an effective tax rate of approximately 19%.
For fiscal 2026, KB Home is expecting deliveries to be in the range of 11,000 to 12,500 homes. The company is expecting housing revenues to be in the range of $5.1-$6.1 billion.
KB Home currently carries a Zacks Rank #4 (Sell).
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This article originally published on Zacks Investment Research (zacks.com).
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