KB Home's Q2 Earnings & Revenues Beat Estimates, Stock Up

Core Viewpoint - KB Home's stock increased by 3% following the release of its second-quarter fiscal 2025 results, which exceeded earnings and revenue estimates, although both metrics showed a year-over-year decline [1][4]. Financial Performance - Adjusted earnings per share (EPS) were reported at $1.5, surpassing the Zacks Consensus Estimate of $1.45 by 3.5%, but down from $2.15 in the same quarter last year [4]. - Total revenues reached $1.53 billion, exceeding the consensus mark of $1.495 billion by 2.3%, yet reflecting a 10.5% decrease year-over-year [4]. Market Conditions - The results indicate a soft housing market, with homebuyers facing affordability challenges due to high mortgage rates, leading to a reduction in net orders [2][9]. - Net orders fell by 13% year-over-year to 3,460 units, with the value of net orders decreasing to $1.611 billion from $2.032 billion in the previous year [6]. Segment Analysis - Homebuilding revenues declined by 10.4% to $1.525 billion, with home deliveries down 11% to 3,120 units [5]. - The average selling price (ASP) for homes increased by 1.2% year-over-year to $488,700 [5]. Operational Metrics - The backlog at the end of the quarter totaled 4,776 homes, down from 6,270 homes a year ago, with potential housing revenues from the backlog declining by 27% to $2.288 billion [7]. - The housing gross margin contracted by 150 basis points to 19.7%, attributed to lower prices and higher land costs [8]. Financial Position - As of May 31, 2025, KB Home had cash and cash equivalents of $308.9 million, down from $598 million at the end of fiscal 2024, with total liquidity of $1.19 billion [11]. - The debt-to-capital ratio increased to 32.2% from 29.4% at the end of fiscal 2024 [11]. Guidance Update - KB Home has lowered its fiscal 2025 guidance for housing revenues to a range of $6.30-$6.5 billion, down from the previous expectation of $6.6-$7 billion [13]. - The expected housing gross margin is now between 19% and 19.4%, compared to the prior range of 19.2%-20% [14].