Shares of homebuilder KB Home (KBH) sank in after-hours trading after the company reported earnings for its first quarter of Fiscal Year 2025. Earnings per share came in at $1.49, which missed analysts’ consensus estimate of $1.58 per share. This is the second EPS miss for the company in the last four quarters.
In addition, sales decreased by 5.4% year-over-year, with revenue hitting $1.39 billion. This also missed analysts’ expectations of $1.5 billion. KBH saw net orders fall by 17% to 2,772 homes, while deliveries decreased by 9% to 2,770 homes. As a result, the company’s remaining backlog of 4,436 homes equates to a value of $2.2 billion.
According to CEO Jeffrey Mezger, homebuyers are hesitant to make purchases due to economic uncertainty and affordability concerns. As a result, this year’s spring housing market has been slower than usual. However, after making some adjustments to its communities to provide better value, there has been a significant improvement in sales over the past month.
2025 Outlook
Looking forward, management has provided the following guidance for the rest of 2025:
- Housing revenues of $6.6 billion to $7 billion
- Average selling price of $480,000 to $495,000
- Homebuilding operating income margin of approximately 9.4%
- Housing gross profit margin in the range of 19.2% to 20.0%
This outlook from KB Home was lowered from before due to weaker-than-expected net orders in the first quarter. Despite recent improvements in sales trends, the company said that the slower start to the year led to the adjustment. This, combined with the earnings and revenue miss, is what led shares to plunge.
Is KBH Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on KBH stock based on four Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average KBH price target of $76.35 per share implies 23.6% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
