KB Home Beats Q3 Estimates but Cuts Full-Year Margin Guidance, Sending Stock Lower

KB Home reported fiscal third-quarter 2026 results that met or exceeded its own guidance, with housing revenue of $1.3 billion, net income of $65 million and diluted EPS of $1.05, but revenue fell 20% year over year and deliveries dropped 19% to 2,732 homes. The company's shift toward a built-to-order model lifted its adjusted housing gross margin sequentially to 16.8% from 15.7% in Q2, with built-to-order deliveries accounting for 74% of closings, though margins remained below prior-year levels amid pricing, cost and mix pressures.

Despite the Q3 beat, KB Home cut its forward outlook. Management trimmed its fourth-quarter gross margin forecast by roughly one percentage point from prior guidance and lowered its expected average selling price by about $20,000, attributing both moves to slower sales in Southern California, a shift in the mix of communities expected to deliver, and higher direct and land costs. For Q4, KB Home guided housing revenues of $1.45 billion to $1.65 billion. The company now expects full-year housing gross profit margin of 16% to 16.2%, and fourth-quarter margin of 16% to 16.6%, both assuming no inventory charges. KB Home also authorized up to $50 million in share buybacks.

The guidance cut prompted multiple analyst price target reductions. Bank of America lowered its target citing a weaker margin outlook, while Citizens cut its target pointing to traffic weakness and pricing pressure. UBS reiterated its rating on valuation grounds without raising its target. KBH shares fell approximately 3% in premarket trading following the results, and the stock was in focus for elevated options activity during the session.