To The Moon

$KB Home(KBH)$ is scheduled to release its fiscal Q2 2025 earnings after the market closes on Monday, 23 June 2025.

Analysts' consensus EPS estimate for Q2 2025 is around $1.45 - $1.46 per share.

Revenue is expected to be around $1.51 billion.

It is worth noting that KBH missed analysts' consensus estimates for Q1 2025 (EPS of $1.49 vs. $1.56 estimated, and revenue of $1.39 billion vs. $1.51 billion estimated). This makes the Q2 performance even more critical. Analysts project a year-over-year decrease in full-year 2025 EPS, reflecting expectations of softer home sales. For Q2 specifically, the forecast suggests a decrease of over 32% year-over-year compared to Q2 2024's EPS of $2.15.

Operational Metrics

Net Orders and Backlog: A key indicator of future revenue. In Q1 2025, net orders were 2,772, with improvements noted in the latter part of the quarter and into Q2. An increase in net orders and good backlog conversion rates would signal continued demand for KBH's homes.

Community Count: KBH anticipates maintaining 250 to 260 active communities throughout Q2 and Q3 2025, ending the year with around 250. This metric shows the company's operational footprint and capacity for new sales.

Build Times: In Q1, build times improved to 147 days for built-to-order homes, with a goal of reaching 120 days. Further improvement here would indicate greater efficiency and faster revenue recognition.

Gross Margins: KBH has demonstrated discipline in maintaining gross margins, which held steady at 11.1% in previous periods. Resilience in gross margins despite potential revenue declines would be a strong positive, indicating effective cost management.

Financial Health and Shareholder Returns

Balance Sheet: KBH has a strong balance sheet with ample liquidity and no debt maturities until 2027. This financial flexibility is crucial in a volatile housing market.

Shareholder Returns: In prior quarters, KBH has returned capital to shareholders via share buybacks and consistent dividends. They have already declared a Q2 2025 dividend of $0.25 per share, maintaining consistency. Investors will look for continued confidence in returning value.

Market Conditions and Outlook

The broader housing market faces headwinds such as rising mortgage rates and affordability concerns. KBH's focus on affordable housing (often priced under $400,000) and in Sun Belt markets may offer some insulation.

The company's outlook and guidance for the remainder of 2025 will be closely scrutinized for insights into management's expectations for market demand and their operational strategy.

KB Home (KBH) Last Neutral Earnings Call Saw Share Price Declined By 17.69%

KB Home had a neutral earnings call on 24 March 2025 which saw its share price declined by 17.69% since.

While KB Home reported strong order numbers and improved several key metrics such as gross margin and community count, the call highlighted challenges including revised revenue guidance, a delivery shortfall, and a difficult sales environment in Florida. The sentiment is balanced with positive long-term outlooks and investments in land and community growth, but overshadowed by current operational challenges.

KB Home (KBH) Guidance

During the KB Home 2025 First Quarter Earnings Conference Call, the company provided guidance indicating a reduction in revenue expectations for fiscal 2025 due to a softer selling environment. The total revenues for the first quarter were $1.4 billion with a diluted earnings per share of $1.49. The company reported delivering fewer homes than anticipated, with a shortfall of approximately 225 homes, partly due to 75 delayed deliveries in Southern California affected by wildfires. The gross margin, excluding inventory-related charges, was 20.3%, with an SG&A ratio of 11%, resulting in an operating income margin of 9.3%.

The company also highlighted an increase in book value per share to over $57, a 12% year-over-year increase. Net orders were 2,772, with an average community count in line with projections, and a monthly absorption pace of 3.6 homes. KB Home's backlog stood at over 4,400 homes valued at $2.2 billion, with improved build times of 147 days for built-to-order homes. The company anticipates maintaining 250 to 260 active communities throughout the second and third quarters of 2025 and ending the year with approximately 250 communities. The guidance for full-year revenues was revised to a range of $6.6 billion to $7 billion, and the overall average selling price projection was adjusted to between $480,000 and $495,000.

What to Look For When the Earnings are Released

Surpass or Miss Estimates: Did KBH beat, meet, or miss the consensus EPS and revenue estimates? KB Home reported total revenues of $1.4 billion and diluted earnings per share of $1.49 for the first quarter of fiscal 2025.

Gross margin held at 20.3% excluding inventory-related charges, above the midpoint of the guided range, and the book value per share increased to over $57, a 12% year-over-year increase.

Revenue guidance for fiscal 2025 was lowered due to softer demand at the start of the spring selling season.

Guidance: What is KBH's outlook for Q3 and the full fiscal year 2025 regarding deliveries, average selling price, community count, and gross margins?

Operating income margin decreased to 9.2% from 10.8% in the prior year, with reduced guidance for the full year operating income margin. Florida was identified as the softest state in terms of sales demand, requiring significant pricing action to stimulate sales.

The monthly absorption pace per community dropped to 3.6 homes, compared to 4.6 in the previous year's first quarter.

Net Orders vs. Cancellations: A strong net order number with controlled cancellation rates will be positive.

The company generated 2,772 net orders in the first quarter, and saw a meaningful improvement in net orders in the last two weeks of the quarter, continuing into the second quarter. The average community count increased by 7% year over year, with plans to maintain roughly 250 to 260 active communities throughout the 2025 second and third quarters.

Delivered fewer homes than anticipated, approximately 225 homes short of the first quarter expectation, including a delay of 75 homes in Southern California.

Cash Flow and Capital Allocation: How did the company manage cash flow, and what are their plans for land investments and shareholder returns?

Invested $920 million in land acquisition and development during the quarter, with a lot position increased by 41% to over 78,200 lots owned or controlled. Build times improved to 147 days, with built-to-order homes at 139 days, moving closer to the goal of 120 days from start to home completion.

KB Home (KBH) Price Target

Based on 11 analysts from Tiger Brokers offering 12 month price targets for KB Home in the last 3 months. The average price target is $65.64 with a high forecast of $86.00 and a low forecast of $53.00. The average price target represents a 29.66% change from the last price of $50.62.

Technical Analysis - Exponential Moving Average (EMA)

We have been seeing KB Home having a lot of challenges since the start of 2025, it have been on a downward trend with negative momentum, now that the bulls had lost the key level, the bears are in control, which would mean that any slight miss in estimates could send the stock going further downside.

There have been much uncertainity with the potential middle east war and also tariffs, so I would expect KB Home to continue to experience a downside after its earnings.

Summary

The Q2 2025 earnings for KB Home will provide critical insights into its ability to navigate a challenging housing market, particularly in terms of maintaining profitability through operational efficiency and managing demand for its affordable housing offerings.

We could see a potential downside movement for KB Home share price wth the challenging housing market and also reduced investors sentiment and confidence.

Appreciate if you could share your thoughts in the comment section whether you think KB Home could turn around with an earning surprise if they can improve their operational efficiency.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.