Core Insights - KB Home is experiencing significant challenges due to higher mortgage rates and economic uncertainty, leading to a projected double-digit decline in earnings for the fiscal year [1] - The company reported a revenue drop to $1.53 billion in fiscal Q2 2025, down from $1.71 billion a year ago, with homes delivered falling 11% to 3,120 [2] - Adjusted gross profit margin decreased to 19.7% from 21.2% year-over-year, impacted by price reductions, higher land costs, and reduced operating leverage [3] Financial Performance - KB Home's fiscal Q2 2025 earnings beat the Zacks Consensus Estimate by $0.05, reporting $1.50 compared to the consensus of $1.45 [2] - The company is guiding a full-year gross profit margin of 19% to 19.4%, lower than previous years, with analysts cutting earnings estimates for fiscal 2025 to $6.55, a decline of 22.5% from $8.45 last year [6] - For fiscal 2026, the Zacks Consensus Estimate has decreased to $6.86 from $7.64, indicating a modest earnings growth of 4% [7] Strategic Adjustments - In response to market conditions, KB Home is scaling back on land acquisitions, with investments in land and land development falling 23% to $513.9 million [4] - The company repurchased $200 million in stock at an average price of $54, reflecting a strategy to leverage its cheap stock price [4] - KB Home maintains a total liquidity of $1.19 billion, including $308.9 million in cash, and continues to pay a dividend with a yield of 1.80% [5] Market Sentiment - Shares of KB Home have retreated in 2025 due to tough housing market conditions, although they recently bounced off lows as mortgage rates fell [10][12] - The forward price-to-earnings (P/E) ratio stands at 8.5, indicating the stock is considered cheap, typically associated with a P/E ratio under 10 [12] - There is cautious optimism regarding a potential recovery in earnings, contingent on gross profit margins rising above 20% [13]

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) For Q2 2025, KB Home reported **total revenues** of **$1.53 billion** and **net income** of **$107.9 million**, a decrease from **$1.71 billion** and **$168.4 million** in Q2 2024, respectively, with **total assets** at **$7.02 billion** and **Cash flow from operations** at **-$165.9 million** for the first six months of 2025 | Financial Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,529.6 million | $1,709.8 million | $2,921.4 million | $3,177.6 million | | **Net Income** | $107.9 million | $168.4 million | $217.4 million | $307.1 million | | **Diluted EPS** | $1.50 | $2.15 | $3.00 | $3.91 | | Balance Sheet Item | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $308.9 million | $598.0 million | | Inventories | $5,913.3 million | $5,528.0 million | | Total Assets | $7,017.6 million | $6,936.2 million | | Notes Payable | $1,892.9 million | $1,691.7 million | | Total Stockholders' Equity | $3,990.5 million | $4,060.6 million | | Cash Flow Activity (Six Months Ended) | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Net cash from operating activities | ($165.9 million) | $90.0 million | | Net cash used in investing activities | ($20.4 million) | ($29.0 million) | | Net cash used in financing activities | ($102.0 million) | ($144.1 million) | [Segment Information](index=8&type=section&id=2.%20Segment%20Information) The company operates through four homebuilding segments and one financial services segment, with the **West Coast segment** being the largest contributor to **revenues** (**$1.26 billion**) and **pretax income** (**$145.6 million**) for the six months ended May 31, 2025 | Homebuilding Segment (Six Months Ended May 31) | Revenues 2025 | Revenues 2024 | Pretax Income 2025 | Pretax Income 2024 | | :--- | :--- | :--- | :--- | :--- | | West Coast | $1,261.8 million | $1,256.7 million | $145.6 million | $152.9 million | | Southwest | $627.0 million | $641.8 million | $114.1 million | $110.5 million | | Central | $558.6 million | $696.3 million | $46.2 million | $85.1 million | | Southeast | $464.4 million | $568.4 million | $33.3 million | $70.8 million | - **Inventory impairment** and **land option contract abandonment charges** for the six months ended May 31, 2025, totaled **$7.0 million**, a significant increase from **$2.5 million** in the prior-year period[28](index=28&type=chunk) [Financial Services](index=9&type=section&id=3.%20Financial%20Services) The **financial services segment's pretax income** decreased by **37%** to **$15.7 million** for the six months ended May 31, 2025, compared to **$24.8 million** in the prior year, driven by lower revenues and reduced equity income from the unconsolidated mortgage joint venture (KBHS) | Financial Services (Six Months Ended May 31) | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $9.6 million | $14.4 million | | Equity in income of unconsolidated joint venture | $9.2 million | $13.5 million | | **Pretax Income** | **$15.7 million** | **$24.8 million** | [Inventories](index=11&type=section&id=6.%20Inventories) **Total inventories** increased to **$5.91 billion** as of May 31, 2025, up from **$5.53 billion** at November 30, 2024, primarily due to growth in **land under development** to **$3.80 billion**, with **$55.0 million** of **interest costs** capitalized | Inventory Component | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Homes completed or under construction | $2,117.7 million | $1,990.1 million | | Land under development | $3,795.7 million | $3,537.9 million | | **Total** | **$5,913.3 million** | **$5,528.0 million** | [Inventory Impairments and Land Option Contract Abandonments](index=11&type=section&id=7.%20Inventory%20Impairments%20and%20Land%20Option%20Contract%20Abandonments) The company recognized no **inventory impairment charges** in the first six months of 2025 or 2024, but **land option contract abandonment charges** significantly increased to **$7.0 million** for the six months ended May 31, 2025, from **$2.5 million** in 2024 - **Land option contract abandonment charges** were **$5.6 million** for Q2 2025 and **$7.0 million** for the six months ended May 31, 2025[41](index=41&type=chunk) - **No inventory impairment charges** were recognized for the three-month and six-month periods ended May 31, 2025 and 2024[39](index=39&type=chunk) [Debt and Financing](index=18&type=section&id=14.%20Notes%20Payable) **Total notes payable** increased to **$1.89 billion** as of May 31, 2025, from **$1.69 billion** at November 30, 2024, primarily due to drawing **$200.0 million** from the **unsecured revolving credit facility**, while remaining in compliance with all **debt covenants** | Debt Instrument | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Unsecured revolving credit facility | $200.0 million | $0 | | Senior unsecured term loan | $359.2 million | $358.8 million | | Senior notes | $1,330.6 million | $1,329.7 million | | **Total** | **$1,892.9 million** | **$1,691.7 million** | - As of May 31, 2025, the company had **$881.7 million** available for cash borrowings under its **$1.09 billion** credit facility[68](index=68&type=chunk) [Commitments and Contingencies](index=20&type=section&id=16.%20Commitments%20and%20Contingencies) The company faces various commitments and contingencies, including a **warranty liability** of **$97.7 million**, approximately **280 construction defect claims** in Florida, a **subpoena from the U.S. Department of Justice** regarding ENERGY STAR homes, and **Outstanding performance bonds** totaling **$1.44 billion** - The company is addressing approximately **280** outstanding claims in Florida related to Chapter 558, alleging construction defects, primarily concerning stucco and water-intrusion issues[93](index=93&type=chunk) - On October 2, 2023, the company received a **subpoena from the U.S. Department of Justice** regarding the inspection, rating, and marketing of its ENERGY STAR certified homes. The company is cooperating with the government[96](index=96&type=chunk) - As of May 31, 2025, the company had **$1.44 billion** in **outstanding performance bonds** and **$82.7 million** in letters of credit to secure project completions[94](index=94&type=chunk) [Stockholders' Equity](index=23&type=section&id=18.%20Stockholders'%20Equity) During the first half of 2025, the company **repurchased** **4.5 million shares** of its **common stock** for **$250.0 million**, with **$450.0 million** remaining available under the current **share repurchase authorization**, and paid a **quarterly cash dividend** of **$0.25 per share** in Q2 2025 - In the first half of 2025, the company **repurchased** **4,488,614 shares** for **$250.0 million**. **$450.0 million** remains authorized for future repurchases as of May 31, 2025[100](index=100&type=chunk) - A **quarterly cash dividend** of **$0.25 per share** was declared and paid in the second quarter of 2025[102](index=102&type=chunk) [Management's Discussion and Analysis (MD&A)](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported that **market conditions softened** in Q2 2025 due to housing affordability concerns and elevated mortgage rates, leading to a **13%** year-over-year decline in **net orders**, prompting a **new pricing strategy** and a downward revision of **full-year 2025 guidance** for **housing revenues** to between **$6.30 billion** and **$6.50 billion** [Overview of Operations](index=25&type=section&id=OVERVIEW) In Q2 2025, the company faced a softer market with subdued demand, resulting in **net orders** falling **13%** year-over-year to **3,460**, a **10%** decrease in Q2 **housing revenues** to **$1.52 billion**, and **diluted EPS** falling **30%** to **$1.50** - **Market conditions softened** in Q2 2025 due to housing affordability concerns, elevated mortgage rates, and weakening consumer confidence[106](index=106&type=chunk) - **Net orders** for Q2 2025 were down **13%** year-over-year to **3,460**, with a monthly net order pace per community of **4.5**, compared to **5.5** in the prior year[107](index=107&type=chunk) - A **new pricing strategy** was implemented, reducing selling prices and other homebuyer concessions to stimulate demand. This led to an **8%** decrease in the **average selling price** of **net orders** for the quarter[108](index=108&type=chunk) [Homebuilding Operations Analysis](index=26&type=section&id=HOMEBUILDING) **Homebuilding revenues** for Q2 2025 fell **10%** to **$1.52 billion**, driven by an **11%** decrease in homes delivered, with **Operating income** dropping **30%** to **$131.5 million**, and **housing gross profit margin** contracting by **180 basis points** to **19.3%**, while **ending backlog value** was down **27%** year-over-year to **$2.29 billion** | Metric (Q2) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Homes Delivered | 3,120 | 3,523 | -11% | | Housing Gross Profit Margin | 19.3% | 21.1% | -180 bps | | Adjusted Housing Gross Profit Margin | 19.7% | 21.2% | -150 bps | | SG&A as % of Housing Revenues | 10.7% | 10.1% | +60 bps | | Metric (Q2) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Orders | 3,460 | 3,997 | -13% | | Net Order Value | $1.61 billion | $2.03 billion | -21% | | Cancellation Rate | 16% | 13% | +3 p.p. | | Ending Backlog Value | $2.29 billion | $3.12 billion | -27% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q2 2025 with **$1.19 billion** in **total liquidity**, including **$308.9 million** in cash and **$881.7 million** available on its credit facility, shifting capital allocation towards **share repurchases** (**$250.0 million** in H1 2025) and scaling back **land and development investments**, resulting in a **debt-to-capital ratio** increase to **32.2%** - **Total liquidity** was **$1.19 billion** at the end of Q2 2025, consisting of cash and available credit facility capacity[159](index=159&type=chunk) - The company is scaling back **land and development investments** (down **23%** YoY in Q2) while increasing **share repurchases** (**$250.0 million** in H1 2025)[111](index=111&type=chunk)[163](index=163&type=chunk) - The **debt-to-capital ratio** increased to **32.2%** at May 31, 2025, from **29.4%** at November 30, 2024, due to **$200.0 million** in borrowings under the credit facility[169](index=169&type=chunk) - **Net cash used in operating activities** was **$165.9 million** for the first six months of 2025, a reversal from **$90.0 million** provided in the prior year, mainly due to a **$390.6 million** increase in inventories[182](index=182&type=chunk) [Outlook](index=43&type=section&id=Outlook) Due to persistent soft market conditions, KB Home has revised its **2025 full-year guidance** downwards, expecting **housing revenues** between **$6.30 billion** and **$6.50 billion**, with an **average selling price** of **$480,000** to **$490,000**, and a **housing gross profit margin** of **19.0%** to **19.4%** | 2025 Full Year Guidance | Revised Projection | Prior Year (2024) | | :--- | :--- | :--- | | Housing Revenues | $6.30 billion - $6.50 billion | $6.90 billion | | Average Selling Price | $480,000 - $490,000 | $486,900 | | Housing Gross Profit Margin | 19.0% - 19.4% | 21.1% | | Ending Community Count | Approx. 250 | 258 | | Q3 2025 Guidance | Projection | Prior Year (Q3 2024) | | :--- | :--- | :--- | | Housing Revenues | $1.50 billion - $1.70 billion | $1.75 billion | | Average Selling Price | $470,000 - $480,000 | $480,900 | | Housing Gross Profit Margin | 18.1% - 18.7% | 20.7% | - The company expects to repurchase between **$100.0 million** and **$200.0 million** of its **common stock** in the **third quarter** of 2025[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its **market risk profile** since November 30, 2024, except for increased **interest rate risk exposure** due to **$200.0 million** in cash borrowings outstanding under its **variable-rate** Credit Facility as of May 31, 2025 - The **primary change in market risk** is related to the **$200.0 million** of **variable-rate debt** drawn from the Credit Facility, which is subject to interest rate fluctuations based on SOFR[213](index=213&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's **disclosure controls and procedures** and concluded they were effective as of May 31, 2025, with no material changes in **internal control over financial reporting** during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's **disclosure controls and procedures were effective** as of May 31, 2025[216](index=216&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings & Risk Factors](index=47&type=section&id=Item%201.%20Legal%20Proceedings%20%26%20Item%201A.%20Risk%20Factors) The company refers to Note 17 of the financial statements for details on **legal proceedings**, and reports **no material changes to risk factors** previously disclosed in the Annual Report on Form 10-K for the year ended November 30, 2024 - For **legal proceedings**, the report refers to Note 17 in the financial statements[217](index=217&type=chunk) - **No material changes to risk factors** were reported since the last Annual Report[218](index=218&type=chunk) [Share Repurchases](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, KB Home **repurchased** **3,734,675 shares** of its **common stock** for a **Total Cost** of **$200.0 million**, with **$450.0 million** remaining available under its **board-authorized share repurchase program** as of May 31, 2025 | Period (2025) | Total Shares Purchased | Average Price Paid per Share | Total Cost | | :--- | :--- | :--- | :--- | | March | 0 | N/A | $0 | | April | 2,072,237 | $52.56 | $108.9 million | | May | 1,662,438 | $54.79 | $91.1 million | | **Q2 Total** | **3,734,675** | **$53.55** | **$200.0 million** | - As of May 31, 2025, **$450.0 million** remained available for repurchase under the existing authorization[219](index=219&type=chunk)

Well, KB Home cutting its revenue outlook for the year after reporting weak second quarter results. This is the housing market. It remains sluggish with existing home sales seeing their worst May since 2009.Joining me now, we've got Meredith Whitney, Meredith Whitney Advisory Group CEO. Meredith, good to have you back on Yahoo Finance with us. We we just heard remarks from Fed Chair Jerome Pal that he plans to keep rates on hold.So, what is the risk that that poses to the housing market. Well, the housing m ...

Ugly picture for new home sales this morning, hitting a seven-month low. Market doesn't like it. Diana Ol has the numbers and the why.Diana. Yeah, Kelly, you stole my word. I was going to say ugly report.No question. Look, sales of newly built homes dropped nearly 14% in May from April. The street was looking for a 6% decline.This count is based on signed contracts. So, people out shopping in May when mortgage rates remain stubbornly high. The average on the 30-year fixed mortgage started May at 6.83% 83% r ...

Group 1 - In May, new single-family home sales in the U.S. fell sharply by 13.7% month-over-month, totaling 623,000 units, significantly below the market expectation of 695,000 units [1] - Year-over-year, the sales figure decreased by 6.3%, falling short of the average sales of 671,000 units over the past six months and 676,000 units over the past year [1] - The data reflects buyers' actual ordering intentions in May, with rising mortgage rates severely impacting housing affordability [1] Group 2 - Lennar's co-CEO indicated that the macroeconomic environment remains challenging, with high mortgage rates and various uncertainties dampening consumer confidence, leading to weakened demand [2] - Different strategies among builders are evident, with Lennar lowering home prices in response to reduced demand, while KB Home has raised prices, reflecting regional market differences [2] - Despite weak sales, the median price of new homes in May was $426,600, a 3% increase from the previous year [2] Group 3 - The inventory of new single-family homes has accumulated rapidly, with 507,000 units available for sale by the end of May, resulting in a supply level of 9.8 months, the highest since the Fed began raising interest rates in 2022 [2] - This inventory level has increased by 15% compared to the same period in 2024 and is among the most abundant supply phases since the 2009 financial crisis, only briefly reaching similar levels in the summer of 2022 [2]

Sales Performance - Sales of new single-family homes dropped 13.7% in May compared to April, totaling 623,000 units on a seasonally-adjusted, annualized basis, which is 6.3% lower than May 2024 and below both the 6-month average of 671,000 and the one-year average of 676,000 [1] - Wall Street analysts had expected May new home sales to be 695,000 according to estimates from Dow Jones [1] Mortgage Rates - The average rate on the 30-year fixed mortgage started May at 6.83%, rose to just over 7%, and settled back at 6.95% by the end of the month [2] - High mortgage rates are impacting buyer activity, limiting the potential for sales increases [3] Market Conditions - The macroeconomic environment remains challenging, with high mortgage interest rates and diminished consumer confidence affecting demand [4] - Home builders are experiencing mixed responses, with some lowering prices while others, like KB Home, are raising prices despite the overall market conditions [4] Pricing and Supply - The median price of a new home sold in May was $426,600, which is 3% higher than the previous year [5] - Slower sales have led to a significant increase in supply, with 507,000 new homes available at the end of May, representing a 9.8-month supply at the current sales rate, which is 15% higher than May 2024 [5] - This level of supply has not been seen since the summer of 2022 and has not been this high since 2009 during the subprime mortgage crisis [6]

Core Viewpoint - The article emphasizes the importance of fundamental analysis in identifying undervalued companies with long-term growth potential, advocating for a value investing approach that focuses on purchasing quality companies at a discount to their intrinsic value and holding them for extended periods to maximize earnings and shareholder returns [1]. Summary by Relevant Categories Investment Strategy - The investment strategy discussed is a blend of value investing principles and a focus on long-term growth, highlighting the significance of buying quality companies at a discount [1]. Company Characteristics - The article suggests that the ideal companies for investment are those that exhibit long-term growth potential and are currently undervalued in the market [1].

Q2 2025 Performance - Housing revenues decreased by 10% year-over-year, totaling $1.53 billion in Q2 2025 compared to $1.70 billion in Q2 2024[21] - Deliveries decreased by 11% year-over-year, with 3,120 homes delivered in Q2 2025 versus 3,523 in Q2 2024[21] - Net orders decreased by 13% year-over-year, from 3,997 in Q2 2024 to 3,460 in Q2 2025[21] - Net order value decreased by 21% year-over-year, amounting to $1.61 billion in Q2 2025 compared to $2.03 billion in Q2 2024[21] - Backlog homes decreased by 24% year-over-year, from 6,270 in Q2 2024 to 4,776 in Q2 2025[21] - Backlog value decreased by 27% year-over-year, totaling $2.29 billion in Q2 2025 compared to $3.12 billion in Q2 2024[21] Financial Highlights - Total liquidity was $1.19 billion, including $308.9 million in cash and $881.7 million of available capacity under the unsecured revolving credit facility[22] - The company repurchased approximately 3.7 million shares of its outstanding common stock at a total cost of $200 million during the quarter[22] - Stockholders' equity totaled $3.99 billion, and book value per share increased 10% to $58.64[22] Strategic Positioning - Approximately 60% to 70% of the company's business is Built to Order (BTO), allowing buyers to personalize their homes[3] - The company's ENERGY STAR homes are up to 20% more efficient than standard new homes built to code[91]

After the bell Monday, homebuilder KB Home topped second-quarter revenue and profit estimates, but cut its full-year sales forecast as the housing market remains sluggish. https://t.co/0CumiuziNY ...

Core Insights - KB Home reported second-quarter revenue of $1.52 billion, exceeding analyst estimates of $1.51 billion, and earnings of $1.50 per share, surpassing expectations of $1.47 per share [1][2] Financial Performance - The second-quarter financial performance was solid, with results meeting or exceeding guidance ranges, driven by improvements in lowering build times and reducing direct construction costs [2] Future Guidance - KB Home expects full-year 2025 housing revenue to be in the range of $6.3 billion to $6.5 billion, a decrease from prior guidance of $6.6 billion to $7 billion, with anticipated average selling prices of $480,000 to $490,000 [3] Stock Performance - Following the earnings announcement, KB Home shares gained 0.8% to trade at $53.72 [3] Analyst Ratings and Price Targets - B of A Securities maintained a Neutral rating and lowered the price target from $58 to $54 - UBS maintained a Buy rating and cut the price target from $86 to $80 - Wells Fargo maintained an Underweight rating and lowered the price target from $53 to $52 - Barclays maintained an Equal-Weight rating and reduced the price target from $56 to $49 - Evercore ISI Group maintained an Outperform rating and cut the price target from $77 to $70 [5]