KB Home Beats Q3 Earnings Estimates but Cuts Margin Outlook as Housing Market Deteriorates

KB Home reported fiscal third-quarter earnings per share of $1.05, beating the consensus estimate of $0.88 by roughly 19%, but the result still marked a 35% decline from the same period a year ago. Revenue came in at $1.3 billion, in line with expectations but down 20% year over year, as homes delivered fell 19% to 2,732 and net orders dropped 12% to 2,604. Housing gross profit margin contracted 170 basis points to 16.5%, while the adjusted figure fell 210 basis points to 16.8%.

Management acknowledged that market conditions have weakened since the company's June earnings report, pointing to higher mortgage interest rates as a further drag on buyer affordability. In response, KB Home trimmed its full-year housing gross profit margin guidance to a range of 16.0% to 16.2%, down from the prior range of 16.1% to 16.5%. The company nonetheless affirmed its full-year delivery outlook of 10,500 to 11,000 homes and maintained its housing revenue guidance of $4.90 billion to $5.10 billion. Backlog value edged up 3% year over year to $2.1 billion, providing some forward support.

For the fourth quarter, KB Home guided for deliveries of 3,000 to 3,500 homes, housing revenues of $1.45 billion to $1.65 billion, and a gross profit margin of 16.0% to 16.6%. Shares initially jumped roughly 3% on the earnings beat, then reversed sharply in extended trading as investors focused on the margin guidance cut and the company's cautious commentary about elevated rates and weakening buyer demand.