Financial Performance - Revenues for Q1 2025 were $1.39 billion, down 5% from $1.47 billion in Q1 2024[4] - Total revenues for the three months ended February 28, 2025, were $1,391,777, a decrease of 5.2% compared to $1,467,766 for the same period in 2024[15] - Homebuilding revenues decreased to $1,387,041 from $1,461,698, reflecting a decline of 5.1% year-over-year[20] - Net income for the period was $109,557, down 21.0% from $138,665 in the prior year[15] - The company reported a total pretax income of $139,357, down 20.2% from $174,665 in the same quarter last year[15] Home Delivery and Orders - Homes delivered decreased by 9% to 2,770 units compared to the previous year[4] - Homes delivered decreased to 2,770 from 3,037, representing a decline of 8.8% year-over-year[22] - Net orders fell by 17% to 2,772, contributing to a backlog of 4,436 homes, which is a 21% decrease in value to $2.20 billion[7] - Total net orders fell to 2,772, down 16.5% from 3,323 in the same quarter last year[22] Pricing and Margins - Average selling price increased by 4% to $500,700[4] - The average selling price of homes increased to $500,700, up 4.3% from $480,100 in the previous year[20] - Homebuilding operating income was $127.3 million, with a margin of 9.2%, down from 10.8%[4] - Adjusted housing gross profit margin was 20.3%, slightly down from 21.6% in the prior year[24] Assets and Equity - Total assets increased to $6,979,260 from $6,936,169, reflecting a growth of 0.6%[18] - Stockholders' equity rose to $4,092,678, compared to $4,060,616, indicating an increase of 0.8%[18] Liquidity and Investments - Total liquidity stood at $1.25 billion, including $267.8 million in cash and cash equivalents[7] - Inventory increased by 7% to $5.94 billion, with land investments rising by 57% to $920.3 million[7] - The company repurchased $50 million worth of common stock, totaling 753,939 shares at an average price of $66.32 per share[7] Guidance and Tax - Guidance for full-year 2025 includes housing revenues between $6.60 billion and $7.00 billion[7] - The effective tax rate for the quarter was 21.4%, compared to 20.6% in the previous year[7]

A new week of trading begins with pre-market futures well into the green this morning. We had already bounced off last week’s year-to-date lows with a decent, if bumpy, week of trading overall, but we haven’t seen early-morning gains like this in quite some time. The Dow is +400 points at this hour, the S&P 500 is +70 and the Nasdaq +300 points.What has been looming large over this difficult period in the markets is the ominous shadow of April 2nd tariffs, which we had been led to think would be comprehensi ...

KB Home KBH will release its first-quarter financial results after the closing bell on Monday, March 24.Analysts expect the company to report quarterly earnings at $1.58 per share, down from $1.76 per share in the year-ago period. KB Home projects quarterly revenue of $1.50 billion, compared to $1.47 billion a year earlier, according to data from Benzinga Pro.On March 10, Wells Fargo analyst Sam Reid maintained KB Home with an Underweight rating and lowered the price target from $65 to $63.With the recent b ...

Core Viewpoint - President Trump's tariffs could significantly increase material costs for new homes, potentially by up to $10,000, impacting housing affordability [1][2][3] Group 1: Tariff Impact on Home Construction - The National Association of Home Builders (NAHB) reported that Trump's tariffs could raise material prices for the average new single-family home by between $7,500 and $10,000 [2] - The NAHB has been advocating against tariffs due to their negative effects on housing affordability, describing them as a tax on builders, home buyers, and consumers [3] - The implementation of a 25% tariff on Canadian and Mexican imports could increase total costs for imported construction materials by over $3 billion [4] Group 2: Sources of Construction Materials - Softwood lumber is primarily sourced from Canada, while gypsum, a key component of drywall, comes mainly from Mexico [4] - Other materials such as steel, aluminum, and completed home appliances are imported from China, which are also subject to increased tariffs [4]

Group 1 - The stock of KB Home (KBH) is experiencing significant attention due to high implied volatility in the options market, particularly the Dec 19, 2025 $25.00 Call option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in KB Home's stock price, potentially due to an upcoming event [2] - KB Home currently holds a Zacks Rank 4 (Sell) in the Building Products - Home Builders industry, which is in the bottom 8% of the Zacks Industry Rank, with recent analyst estimates showing a decrease from $1.70 to $1.58 per share for the current quarter [3] Group 2 - The high implied volatility surrounding KB Home may indicate a developing trading opportunity, as options traders often seek to sell premium on such options to capture decay, hoping the stock does not move as much as expected by expiration [4]

Company Performance - KB Home's stock closed at $60.74, reflecting a +1.49% change, outperforming the S&P 500's loss of 1.22% on the same day [1] - Over the last month, KB Home's shares decreased by 8.51%, underperforming the Construction sector's loss of 6.27% and the S&P 500's loss of 2.31% [1] Earnings Projections - The upcoming earnings report for KB Home is projected to show earnings per share (EPS) of $1.58, which is a 10.23% decrease from the same quarter last year [2] - Revenue is estimated to be $1.5 billion, indicating a 2.37% increase compared to the same quarter of the previous year [2] Annual Estimates - For the annual period, earnings are anticipated to be $8.42 per share, reflecting a -0.36% change from last year, while revenue is expected to be $7.21 billion, signifying a +3.98% increase [3] - Changes in analyst estimates for KB Home are crucial as they indicate the evolving nature of near-term business trends [3] Valuation Metrics - KB Home is currently trading with a Forward P/E ratio of 7.11, which is lower than the industry average of 7.84, suggesting it is trading at a discount [6] - The company has a PEG ratio of 0.86, compared to the industry average PEG ratio of 0.89 [6] Industry Context - The Building Products - Home Builders industry ranks in the bottom 10% of all industries, with a current Zacks Industry Rank of 227 [7] - The Zacks Industry Rank measures the strength of individual industry groups, indicating that top-rated industries outperform the bottom half by a factor of 2 to 1 [7]

Group 1: Stock Performance - KB Home (KBH) closed at $62.83, marking a +1.18% move from the prior day, outperforming the S&P 500's daily loss of 0.43% [1] - Over the past month, KB Home shares have lost 8.47%, lagging behind the Construction sector's loss of 5.29% and the S&P 500's gain of 2.6% [1] Group 2: Earnings Forecast - KB Home is forecasted to report an EPS of $1.58, reflecting a 10.23% decrease from the same quarter last year [2] - Revenue is expected to be $1.5 billion, showing a 2.37% increase compared to the year-ago quarter [2] Group 3: Full Year Estimates - Analysts expect earnings of $8.42 per share and revenue of $7.21 billion for the full year, indicating changes of -0.36% and +3.98% respectively from last year [3] Group 4: Analyst Estimates and Rankings - Recent adjustments to analyst estimates for KB Home indicate changing business trends, with positive revisions suggesting analyst optimism [4] - The Zacks Rank system currently rates KB Home at 4 (Sell), with a 2.92% decrease in the EPS estimate over the last 30 days [6] Group 5: Valuation Metrics - KB Home has a Forward P/E ratio of 7.38, which is lower than its industry's Forward P/E of 7.94, indicating a valuation discount [6] - The PEG ratio for KB Home is currently 0.89, compared to the industry average PEG ratio of 0.91 [7] Group 6: Industry Context - The Building Products - Home Builders industry, part of the Construction sector, has a Zacks Industry Rank of 244, placing it in the bottom 3% of over 250 industries [7][8]

Backlog and Revenue Distribution - Ending backlog as of November 30, 2024, includes homes under sales contract but not yet delivered, representing potential future housing revenues[46] - Net orders distribution in 2024: Q1 25%, Q2 30%, Q3 24%, Q4 21%[50] - Homes delivered distribution in 2024: Q1 21%, Q2 25%, Q3 26%, Q4 28%[50] - Housing revenues distribution in 2024: Q1 21%, Q2 25%, Q3 25%, Q4 29%[50] Employee Statistics - Company had 2,384 full-time employees as of November 30, 2024, up from 2,205 in 2023[51] - Turnover rate in 2024 was 18%, with 15% voluntary and 3% involuntary turnover[52] Sustainability and Energy Efficiency - Company achieved over 200,000 ENERGY STAR certified new homes built by 2024, more than any other builder in the nation[63] - ENERGY STAR certified homes save homeowners an estimated average of $1,400 annually on utility bills compared to typical resale homes[64] - Most model homes and sales offices in California were powered by solar energy as of November 30, 2024[65] - All-electric homes produce approximately 3,800 pounds less CO2 per year compared to dual-fuel homes[65] - The company achieved a HERS Index score of 45 in 2024, a year earlier than the 2025 target, reducing GHG emissions by 0.5 metric tons per year or 8% compared to the 2020 baseline of 6 metric tons per year[66] - Over 26,000 WaterSense labeled and Water Smart homes have been built, with 1.2 million WaterSense labeled fixtures installed, saving an estimated 2.1 billion gallons of water annually[70] - The company committed to building WaterSense labeled homes in all future Arizona, California, and Nevada communities starting July 2022[69] - WaterSense labeled products used in homes are at least 20% more water-efficient compared to non-labeled products[68] Awards and Recognitions - The company received the 2024 ENERGY STAR Market Leader Awards, setting a new industry record with 30 awards, more than any other homebuilder[71] - The company was the only national homebuilder to receive the 2024 WaterSense Sustained Excellence Award, marking the 14th consecutive year of recognition[71] - The company was named to Newsweek's 2025 list of America's Most Responsible Companies, the only homebuilder to make the list five years in a row[71] - The company was ranked in the top five percent of USA Today's 2024 List of America's Climate Leaders, the highest-ranked homebuilder[71] Corporate Governance - The company's board of directors is 90% independent, with 50% being women or racial/ethnic minorities, and an average tenure of approximately seven years[78] Debt and Interest Rate Management - The company does not use interest rate derivative instruments to manage exposure to changes in interest rates[300] - Fixed rate debt obligations for 2027 and 2029 are $300,000 each, with a total fixed rate debt of $1,340,000 as of November 30, 2024[301] - Variable rate debt is $360,000 with a weighted average effective interest rate of 6.0% as of November 30, 2024[301] - Each 100 basis-point increase in the interest rate would increase the interest incurred by approximately $3.6 million per year for variable rate debt[301] - Fixed rate debt obligations for 2027 and thereafter are $300,000 and $1,040,000 respectively, with a total fixed rate debt of $1,340,000 as of November 30, 2023[304] - Variable rate debt is $360,000 with a weighted average effective interest rate of 6.8% as of November 30, 2023[304] - KBHS manages interest rate risk through best efforts forward sale commitments with secondary market investors[306] - KBHS does not engage in speculative or trading derivative activities, and its entire loan portfolio is held for sale[306] Market and Operational Risks - The company's operational and investment concentration is in California markets, with a focus on first-time homebuyers and higher-income consumers[302] - The company faces risks related to income tax expense volatility associated with stock-based compensation[303] - The company is exposed to risks from information technology failures and data security breaches[303]

Company Analysis - KB Home has demonstrated resilience in growing net orders and improving operational efficiency [1] - The company faces visible macroeconomic challenges that create uncertainty in its outlook [1] Investment Approach - The analyst employs a blend of value investing principles and a focus on long-term growth [1] - The strategy involves buying quality companies at a discount to their intrinsic value and holding them for long-term compounding of earnings and shareholder returns [1] Disclosure - The analyst has no stock, option, or derivative positions in the mentioned companies and no plans to initiate such positions within the next 72 hours [2] - The article expresses the analyst's own opinions and is not influenced by compensation or business relationships with the mentioned companies [2]

Inflation and Market Sentiment - Investors welcomed a second cool inflation report, easing concerns over higher prices [1] - Positive quarterly earnings from major banks (JPMorgan Chase, Goldman Sachs, Citigroup, Wells Fargo) contributed to the positive market sentiment [1] - The latest jobs report pushed the 10-year treasury yield to a 14-month high near 5%, but cool inflation data is expected to alleviate upward pressure on yields [2] - Light inflation figures may help relieve weakness in rate-sensitive market areas like small-caps, with the Russell 2000 having only 23% of its constituents trading above the 50-day moving average [2] Inflation Data Breakdown - The producer price index (PPI) rose 3.3% year-over-year, up from 3% in November but below the median forecast [4] - Wholesale prices increased 0.2% month-over-month, less than the 0.4% projection [4] - Core PPI (excluding food and energy) rose 3.5% year-over-year, lower than the 3.8% expected, and was virtually unchanged month-over-month [5] - The consumer price index (CPI) showed a 0.4% monthly increase and a 2.9% year-over-year rise, both in line with estimates [7] - Core CPI (excluding food and energy) increased 3.2% year-over-year, slightly better than the 3.3% projection, and rose 0.2% month-over-month, lower than expectations [7] Market Volatility and Stocks - Market volatility (VIX) plunged nearly 9% in early trading Wednesday, potentially offering lower-risk entry points in leading stocks [8] - Homebuilders, particularly the SPDR S&P Homebuilders ETF (XHB), rose more than 4% this week as markets rotated into rate-sensitive areas [9] - KB Home (KBH) reported strong Q4 results, with earnings of $2.52 per share (2.86% above estimates) and revenues of $2 billion, leading to a nearly 5% stock rise [10] Big Banks' Performance - JPMorgan Chase (JPM) delivered Q4 earnings of $4.81 per share, a 19.35% surprise versus estimates, with revenues of $42.77 billion (4.4% above consensus) [11] - JPMorgan shares advanced more than 50% over the past year and were up over 1% in early trading Wednesday [12] - Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) also reported quarterly earnings beats of 5.97%, 48.1%, and 7.2%, respectively [13] - All four banks are part of the Zacks Financials – Investment Bank industry, ranked in the top 5% of Zacks Ranked Industries [16] Industry Insights - Quantitative research shows that roughly half of a stock's price movement can be attributed to its industry group [17] - The top 50% of Zacks Ranked Industries outperforms the bottom 50% by more than 2 to 1, highlighting the importance of targeting leading stocks in top-ranked industries [17]