Bear of the Day: KB Home (KBH)

KB Home KBH continues to face challenging market conditions in the housing market. This Zacks Rank #5 (Strong Sell) is expected to see another year of declining earnings.

KB Home is one of the largest homebuilders in the United States. It operates in 49 markets and has built nearly 700,000 homes over the last 65 years.

KB Home Beat on Earnings in the Fourth Quarter of 2025

On Dec 18, 2025, KB Home reported its fourth quarter 2025 earnings and beat on the Zacks Consensus for the third quarter in a row.

Earnings were $1.92 versus the Zacks Consensus of $1.79.

The company said it met most of its goals for the fourth quarter even as the housing market conditions remained challenging due to lower consumer confidence.

Homes delivered fell 9% to 3,619 in the quarter and average selling price declined 7% to $465,600.

The housing gross profit margin fell to 17% compared to 20.9% in the year ago quarter, reflecting price reductions, higher relative land costs and geographic mix.

For the year, homes delivered fell 9% to 12,902. Revenue also fell to $6.24 billion from $6.93 billion in 2024.

The housing market continues to struggle. Net orders fell 10% to 2,414 orders in the fourth quarter. KB Home’s ending backlog totaled 3,128 homes, compared to 4,434 homes.

KB Home had total liquidity of $1.43 billion, including $228.6 million of cash and cash equivalents, and nearly $1.2 billion of available capacity under its upsized unsecured revolving credit facility with various banks, with no cash borrowings outstanding.

KB Home Provides Disappointing Q1 2026 Guidance

Many believed that the housing market might recover in 2026, but KB Home’s guidance for the first quarter doesn’t seem to indicate that.

Deliveries are expected in the range of 2,300 to 2,500 homes.

The housing gross profit margin is also expected to fall from the fourth quarter to the range of 15.4% to 16%.

Analysts are Bearish on 2026

The analysts are bearish. Five estimates were cut in the last 60 days for 2026, with two cut in the prior 30 days.

The 2026 Zacks Consensus has sunk to $4.14 from $4.55 in the last 30 days and is down from $6.33 in the last 60 days.

That’s a decline of 36.5% as KB Home made $6.52 in 2025.

It’s the second year in a row of declining earnings. Here’s what it looks like on the price and consensus chart.

Is the Stock a Deal?

Over the last year, the shares have underperformed the S&P 500.

But they haven’t completely broken down yet as the earnings have.

The stock is cheap, with a forward price-to-earnings (P/E) of 14. A P/E under 15 is usually considered a value. 

KB Home is also shareholder friendly. In Oct 2025, the board of directors authorized a share repurchase of up to $1 billion.

In the fourth quarter, it repurchased $100 million worth of shares and has $900 million remaining on the current authorization. In its 2026 guidance, KB Home said it would do common stock repurchases of $50 million to $100 million.

The company also pays a dividend of $1.00, which is yielding 1.7%.

But the earnings are still sinking.

Investors interested in the homebuilders might want to wait until the earnings outlook turns around before diving in.

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

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