Investors in KB Home (KBH) need to pay close attention to the stock based on moves in the options market lately. That is because the Jan 16, 2026 $35 Callhad some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is ...

Core Viewpoint - KB Home shares have declined approximately 8.4% since the last earnings report, although this performance has outpaced the S&P 500 [1] Group 1: Earnings Report and Estimates - Fresh estimates for KB Home have trended downward over the past month, with the consensus estimate decreasing by 25.3% [2] - The overall outlook indicates a downward shift in estimates, leading to a Zacks Rank of 4 (Sell) for KB Home, suggesting expectations of below-average returns in the coming months [4] Group 2: VGM Scores - KB Home currently holds a subpar Growth Score of D and a Momentum Score of F, while achieving a Value Score of B, placing it in the top 40% for this investment strategy [3] - The aggregate VGM Score for KB Home is C, which is relevant for investors not focused on a single strategy [3]

Financial Performance - Homebuilding revenues for Q1 2025 decreased by 5% year over year to $1.39 billion, with a 9% decrease in homes delivered to 2,770[107]. - Net income for Q1 2025 was $109.6 million, down 21% from the previous year, and diluted earnings per share decreased by 15% to $1.49[107]. - Operating income for Q1 2025 was $127.3 million, down 19% year over year, with operating income as a percentage of revenues at 9.2% compared to 10.8% in the prior year[110]. - Interest income for Q1 2025 was $2.1 million, a decrease from $5.9 million in the same quarter last year, due to lower average balances and interest rates[121]. - Financial services revenues decreased by 22% year-over-year to $4.7 million, primarily due to declines in insurance commissions and title services revenues[140]. - The equity in income of the unconsolidated joint venture for financial services was $4.3 million, down from $7.1 million in the prior year, reflecting a loss in fair value of IRLCs[141]. - In the first quarter of 2025, the company reported revenues of $1.28 billion, with a net income of $106.8 million, reflecting a pretax income of $136.4 million[182]. Sales and Orders - The company experienced a 17% year-over-year decline in net orders, totaling 2,772 for Q1 2025, with a monthly net order pace per community of 3.6 compared to 4.6[108]. - Net orders for Q1 2025 decreased by 17% year-over-year, totaling 2,772, compared to 3,323 in Q1 2024[124]. - The net order value for Q1 2025 was $1,346,067, reflecting a 15% decline from $1,582,191 in Q1 2024[127]. - The cancellation rate increased to 16% in Q1 2025 from 14% in Q1 2024, indicating a slight rise in contract cancellations[130]. - The company implemented targeted sales strategies, including mortgage-related concessions and selective price reductions, to stimulate demand[109]. - The company implemented targeted sales strategies, including mortgage-related concessions, to improve affordability and stimulate demand[125]. Backlog and Inventory - The ending backlog value decreased by 21% year over year to approximately $2.20 billion, reflecting a soft start to the Spring selling season[113]. - Ending backlog of homes decreased by 23% year-over-year to 4,436 homes, with a backlog value of $2,201,933, down 21% from $2,791,744[128]. - The ending community count grew by 7% year-over-year to 255, with an average community count also increasing by 7%[129]. Market Segments - Revenues for the West Coast segment increased by 8% to $601,649, while operating income remained nearly flat at $66,492[134]. - The Southwest segment reported a 3% decline in revenues to $312,879, but operating income increased by 5% to $58,775[135]. - Central segment revenues for the three months ended February 28, 2025, were $275.6 million, a 14% decrease from $320.5 million in the prior year[136]. - Southeast segment revenues for the same period were $196.9 million, down 24% from $259.8 million year-over-year[137]. - The backlog value decline was observed across all homebuilding reporting segments, with the Southeast segment experiencing a 25% decrease[128]. - Operating income for the Central segment declined 34% to $25.5 million, while the Southeast segment's operating income fell 59% to $13.1 million[136][137]. - The average selling price in the Central segment increased by 1% to $367,000, while in the Southeast segment, it decreased by 4% to $400,200[136][137]. Investments and Liquidity - Investments in land and land development increased by 57% year over year to $920.3 million, while share repurchases totaled 753,939 shares at a cost of $50 million[112]. - Cash and cash equivalents totaled $267.8 million as of February 28, 2025, down from $598.0 million at November 30, 2024[149]. - Total liquidity decreased to $1,249,573 thousand as of February 28, 2025, compared to $1,679,713 thousand on November 30, 2024[157]. - The company plans to continue investing in land positions within attractive submarkets throughout 2025, depending on market conditions[154]. - The carrying value of lots owned or controlled under land option contracts increased by 7% to $5,942,547 thousand as of February 28, 2025, compared to $5,528,020 thousand on November 30, 2024[155]. - The total number of lots owned or controlled increased by 2% to 78,233 lots as of February 28, 2025, from 76,703 lots on November 30, 2024[155]. - The company had $100.0 million in cash borrowings under the Credit Facility as of February 28, 2025[160]. Future Outlook - The company expects housing revenues for the second quarter of 2025 to be between $1.45 billion and $1.55 billion, compared to $1.70 billion in the same quarter of 2024[195]. - The anticipated average selling price for homes in the second quarter of 2025 is approximately $488,000, compared to $483,000 in the prior year[195]. - The company projects a homebuilding operating income margin of approximately 8.5% for the second quarter of 2025, down from 11.1% in the same quarter of 2024[195]. - For the full year 2025, the company expects housing revenues to range from $6.60 billion to $7.00 billion, compared to $6.90 billion in 2024[195]. - The company plans to continue investing in land positions while anticipating a sequential decrease in land-related investments in the second quarter of 2025[191]. - The effective tax rate for the second quarter of 2025 is expected to be approximately 24.0%, compared to 23.8% in the same quarter of 2024[195]. Risks and Challenges - The company is subject to risks including general economic conditions, population growth, and conditions in capital markets[199]. - The company faces potential increases in material and trade costs, particularly for ENERGY STAR certified homes[199]. - The company is impacted by changes in interest rates set by the Federal Reserve, which may affect mortgage loans[200]. - The company must navigate competition from other sellers of new and resale homes[200]. - The company is exposed to risks from regulatory instability and changes in government policies affecting the housing market[200]. - The company has to manage the availability and cost of land in desirable areas for new home developments[200]. - The company is at risk from disruptions in supply chains due to geopolitical conflicts and sanctions[200]. - The company has to comply with regulatory requirements that may incur additional costs or liabilities[200].

Company Overview - KB Home operates as a homebuilding company in the United States, constructing and selling various types of homes, including single-family residential homes, townhomes, and condominiums, primarily targeting first-time and move-up homebuyers [2] Financial Performance - Over the past thirty days, four analysts have reduced their earnings estimates for KB Home for both the current year and the next year, leading to a Zacks Rank of 5 (Strong Sell) [3] - The Zacks Consensus Estimate for the current year has decreased from $9.02 to $7.61, while next year's estimate has fallen from $10.70 to $8.17, indicating a projected earnings contraction of 9.94% on flat revenue of $6.93 billion this year [3] Market Conditions - CEO Jeffrey Mezger noted that the downturn is attributed to consumer affordability concerns and uncertainties related to macroeconomic and geopolitical issues, resulting in a cautious approach to homebuying decisions [4] - The typically strong spring selling season experienced muted demand despite healthy traffic in KB Home communities, reflecting the hesitancy among potential buyers [4] Industry Context - KB Home is positioned in the Building Products – Home Buildings industry, which ranks in the bottom 17% of the Zacks Industry Rank [5] - There are two stocks within this industry that are performing better, specifically Zacks Rank 2 (Buy) stocks Dream Finders Homes and Persimmon [5]

Group 1 - The core thesis for KB Home (KBH) is that macroeconomic headwinds create uncertainty in the company's earnings outlook despite operational efficiency improvements [1] - The analyst assigned a hold rating to KB Home in January, indicating a cautious stance on the stock's performance [1] Group 2 - The investment approach focuses on identifying undervalued companies with long-term growth potential, emphasizing value investing principles [1] - The strategy involves purchasing quality companies at a discount to their intrinsic value and holding them for long-term compounding of earnings and shareholder returns [1]

Core Viewpoint - KB Home (KBH) reported disappointing fiscal first-quarter 2025 results, with earnings and total revenues missing estimates and declining year over year [1][4] Financial Performance - Adjusted earnings per share (EPS) were $1.49, missing the Zacks Consensus Estimate of $1.56 by 4.5%, and down from $1.76 in the prior year [4] - Total revenues were $1.392 billion, missing the consensus mark of $1.503 billion by 7.4% and down 5.2% year over year [4] Segment Analysis - Homebuilding segment revenues were $1.387 billion, a decline of 5.1% from $1.462 billion in the prior year, with homes delivered decreasing by 9% to 2,770 units [5] - The average selling price (ASP) increased by 4.3% year over year to $500,700 [5] - Net orders fell 17% year over year to 2,772 units, with the value of net orders decreasing to $1.346 billion from $1.582 billion [6] Market Conditions - The results reflect a soft housing market, with homebuyers facing affordability issues due to high mortgage rates and ongoing macroeconomic uncertainties [2] - The company lowered its fiscal 2025 guidance due to these market uncertainties and a lower net orders level [2][12] Financial Position - As of February 28, 2025, KB Home had cash and cash equivalents of $267.8 million, down from $598 million at the end of fiscal 2024 [10] - The debt-to-capital ratio increased to 30.5% from 29.4% at the end of fiscal 2024 [10] Guidance Adjustments - For fiscal 2025, housing revenues are now expected to be in the range of $6.60-$7 billion, down from $7-$7.50 billion [12] - The expected housing gross margin is now between 19.2% and 20%, down from the previous range of 20-21% [13]

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2] - The news team covers medium and small-cap markets, as well as blue-chip companies, commodities, and broader investment stories [3] - Proactive has bureaus and studios in key finance and investing hubs including London, New York, Toronto, Vancouver, Sydney, and Perth [2][3] Group 2 - The company is focused on sectors such as biotech and pharma, mining and natural resources, battery metals, oil and gas, crypto, and emerging digital and EV technologies [3] - Proactive adopts technology to enhance workflows and improve content production [4] - Automation and software tools, including generative AI, are used, but all content is edited and authored by humans [5]

Group 1 - KB Home reported worse-than-expected fiscal first-quarter earnings and revenue, leading to a reduction in its fiscal 2025 revenue outlook [1] - Following the earnings report, five analysts lowered their price targets for KB Home, with Barclays reducing its target from $60 to $56 [1] - KB Home's stock experienced a decline of 5.6%, trading at $58.32 after the earnings announcement [1] Group 2 - The stock is on track for its worst single-day percentage loss since January, trading at 52-week lows [2] - Over the last six months, KB Home shares have shed 33.4% and have faced overhead pressure from the 40-day moving average since December [2] - The 50-day put/call volume ratio for KB Home is 5.68, ranking in the 97th percentile of annual readings, indicating a significantly bearish sentiment among options traders [2] Group 3 - Today's options activity shows 4,218 puts traded, which is nine times the intraday average volume, compared to 1,335 calls [3] - The most active option is the April 55 put, where new positions are being opened [3]

Financial Data and Key Metrics Changes - The company reported total revenues of $1.39 billion and diluted earnings per share of $1.49 for the first quarter, reflecting a 5% decrease in housing revenues compared to $1.46 billion in the prior year period [10][43][44] - The number of homes delivered decreased by 9% year-over-year, with 2,770 homes delivered, resulting in a backlog conversion rate of 62%, up from 55% in the previous year [44][45] - The gross profit margin for the first quarter was 20.2%, down from 21.5% in the same quarter last year, primarily due to higher land costs and increased homebuyer concessions [49][50] Business Line Data and Key Metrics Changes - The company experienced a shortfall in deliveries, trailing expectations by approximately 225 homes, with about 150 fewer inventory home sales than projected [11][17] - The average selling price of homes delivered was $500,700, with expectations for the second quarter to be approximately $488,000 [46] - The company generated 2,772 net orders in the first quarter, with a monthly absorption pace per community of 3.6 homes, down from 4.6 homes in the previous year [12][13] Market Data and Key Metrics Changes - Consumer confidence has declined due to affordability concerns and macroeconomic uncertainties, leading to slower homebuyer decisions [9][10] - The spring selling season started slower than previous years, prompting the company to lower its revenue guidance for fiscal 2025 to between $6.6 billion and $7 billion [10][39] - The company noted that Florida was the softest market in terms of sales demand, requiring the most pricing adjustments [110] Company Strategy and Development Direction - The company is focused on maintaining a high community count, with 255 active communities at the end of the first quarter, up 7% year-over-year [24] - Investments in land acquisition and development totaled $920 million, with a focus on capital efficiency and maintaining a healthy balance sheet [35][55] - The company aims to balance pace and price in each community while remaining flexible to market conditions [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for the housing market, despite current challenges, and emphasized the importance of adapting to market conditions [35][39] - The company plans to continue improving build times and customer satisfaction while navigating varying market conditions [34][58] - Management acknowledged the need for further actions if market conditions evolve negatively, but noted recent improvements in net orders [15][33] Other Important Information - The company has not seen significant trade labor shortages and reported a 1% decrease in direct costs sequentially and a 3% decrease year-over-year [30][90] - The effective tax rate for the quarter was 21.4%, with expectations for an increase to approximately 24% for the second quarter and full year [53] Q&A Session Summary Question: What level of price adjustments was effective in stimulating demand? - Management indicated that price adjustments ranged from $5,000 to $30,000, with an average reduction of $15,000, which helped improve sales momentum [68][70] Question: How will gross margins evolve in the second half of the year? - Management expects operating margins to improve due to leverage from increased sales volume, despite a 75 basis point hit from price adjustments [76][82] Question: What regional differences exist in sales performance? - Florida was identified as the softest market, requiring more significant pricing adjustments, while Texas markets like Houston and Austin performed better [110][114] Question: How is the company managing its backlog in light of price adjustments? - The company is addressing backlog adjustments on a case-by-case basis, with minimal exposure to backlog issues due to the recent price changes [128]

Investor Presentation First Quarter 2025 1 Forward-Looking Statements Items in this presentation, and statements by KB Home management in relation to this presentation or otherwise, may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current (at the time made) expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our operations, economic and market fac ...