Why Is KB Home (KBH) Down 6.5% Since Last Earnings Report?

Core Viewpoint - KB Home reported mixed results for Q3 fiscal 2024, with earnings meeting estimates and revenues exceeding expectations, indicating a stable demand despite economic concerns [2][3]. Earnings & Revenue Discussion - Adjusted earnings per share (EPS) for Q3 were $2.04, a 13.3% increase from $1.80 in the previous year, driven by higher net income and share repurchases [3]. - Total revenues reached $1.75 billion, surpassing the consensus estimate of $1.73 billion by 1.5% and reflecting a year-over-year increase of 10.4% [3]. Segment Details - Homebuilding revenues were $1.746 billion, up 10.5% year-over-year, with 3,631 homes delivered, a 7.6% increase from the previous year [4]. - The average selling price (ASP) rose 3.1% to $480,900, while net orders slightly decreased to 3,085 units, though their value increased by 2% to $1.54 billion [4]. - The backlog at the end of the quarter was 5,724 homes, down 1.8% from the previous year, with potential housing revenues from the backlog declining 14% to $2.92 billion [4]. Financial Position - As of August 31, 2024, KB Home had cash and cash equivalents of $374.9 million, down from $727.1 million at the end of fiscal 2023, with total liquidity of $1.46 billion [5]. - The debt-to-capital ratio improved to 29.8% from 30.7% at the end of 2023 [5]. Share Repurchase Activity - In Q3, KB Home repurchased approximately 1.87 million shares for $150 million, with $800 million remaining under the repurchase authorization as of August 31, 2024 [6]. Fiscal 2024 Guidance - The company raised its housing revenue expectation to a range of $6.85-$6.95 billion, up from the previous estimate of $6.70-$6.90 billion, and ASP is now projected at $490,000 [7]. - Housing gross margin is expected to be between 21.1% and 21.2%, slightly down from earlier projections, while operating margin is anticipated to be in the range of 11.1%-11.2% [7]. Market Sentiment - KB Home has a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [10].