Key Takeaways
- KB Home missed profit forecasts as high interest rates and general concerns about the economy reduced demand for new homes.
- Housing gross profit margin declined, and the number of home orders was basically unchanged.
- KB Home lowered the high end of its full-year housing gross profit margin outlook.
Shares of KB Home (KBH) slumped Wednesday, a day after the homebuilder missed profit estimates and cut its housing gross profit margin outlook as high borrowing costs and worries about the economy limited buyer demand.
The company reported third-quarter earnings per share (EPS) of $2.04, $0.02 below the average forecast of analysts surveyed by Visible Alpha. Revenue rose 10.4% year-over-year to $1.75 billion, better than expected.
Housing gross profit margin fell to 20.6% from 21.5% a year ago. KB Home said that was mainly attributable to “product and geographic mix.” The net number of homes ordered was basically flat at 3,085.
CEO Says ‘Economic Concerns Were Rising’ During Q3
Chief Executive Officer (CEO) Jeffrey Mezger explained that the company “experienced variability in demand across the quarter, with softening in late June through July, as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising.” However, he noted that with lower rates in August, net orders improved.
KB Home now sees full-year housing gross profit margin of 21.1% to 21.2%, compared with the previous guidance of 21.1% to 21.5%. It changed its revenue prediction to $6.85 billion to $6.95 billion from $6.70 billion to $6.90 billion.
KB Home shares hit an all-time high last week, and even with Wednesday morning’s 4.4% decline they’re up about 34% so far in 2024.
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