KB Home stock retreated Wednesday after the Los Angeles-based homebuilder missed Q3 results late Tuesday. Meanwhile, the Census Bureau released the new residential sales report for August at 10 a.m. ET.
KB Home on Tuesday reported a 13% increase in earnings to $2.04 per share, just short of forecasts for $2.06 per share. Revenue rose 10% to $1.75 billion, which topped FactSet views for $1.73 billion.
Home deliveries increased 8% during the quarter to 3,631 and the company's average selling price climbed 3% to $480,900. Analysts expected 3,577 deliveries for the quarter. KB Homes reported a housing gross profit margin of 20.6%, compared to 21.5% last year.
CEO Jeffrey Mezger noted that net orders were flat year over year, but began to pick up in August. "We 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," Mezger said in the release. "As rates moderated in August, our net orders improved. We are encouraged by this strengthening in demand for our affordably priced homes, and the ongoing positive trend we are experiencing so far in our 2024 fourth quarter."
Net orders for the quarter stood at 3,085 with a 2% rise in order value to $1.54 billion, driven by a higher average selling price.
FactSet analysts anticipated 3,382 new orders.
The company's backlog totaled 5,724 at the end of the quarter with a value of $2.92 billion, compared to 7,008 and $3.4 billion, respectively.
KB Home guided 2024 housing revenues to range from $6.85 billion to $6.95 billion, up from its Q2 forecast of $6.7 billion to $6.9 billion. FactSet expects $6.78 billion.
The company narrowed its average selling price outlook to $490,000. It previously guided an average selling price between $485,000 and $495,000.
Barclays lifted its price target on KB Home stock to 99 from 78 following earnings, The Fly reported. The firm noted that KB Home missed orders on "choppy" demand earlier in the quarter, but with improvement in August and September. The company's gross margin fell short due to mix and price pressures, but its fiscal 2025 revenue guidance was above consensus forecasts, Barclays added. The firm maintained an overweight rating on the shares.
Housing Data
Elsewhere, the Census Bureau released August new residential sales data Wednesday morning. There were were 716,000 new single-family houses sold during the month, down 4.7% from the revised 751,000 sales in July. The Census Bureau initially reported 739,000 new home sales for July. Still, August was up 9.8% from the August 2023 estimate of 652,000 new home sales. The new residential sales also topped analysts forecasts of 700,000, according to MarketWatch.
Sales of previously owned homes fell 2.5% in August from July to 3.86 million units, the National Association of Realtors reported on Sept. 19. Sales were down 4.2% from August 2023 and marked three straight months of fewer than 4 million closings.
Meanwhile, mortgage rates have declined following last week's Fed rate cut on Sept 18. Freddie Mac reported the average 30-year mortgage rate stood at 6.09% for the week ending Sept. 19, down 0.11%. The average 15-year mortgage rate declined 0.12% for the period to 5.15%.
KB Home Stock
KB Home stock carved 5.4% lower Wednesday.
Shares ended Wednesday's session up 32.5% in 2024. At Tuesday's close, KBH stock sat at an 88.12 buy point for a seven-week base.
KB Home has scored four breakouts since December.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
