KB Home (NYSE: $KBH), a leading home building company, released its Q1 fiscal 2025 results on Monday, March 24, 2025, after markets closed. Here is a deep dive into the results.
KB Home Q1 Results
KB Home reported Q1 revenue of $1.39 billion, a 5% decline compared to $1.47 billion last year and below estimates of $5 billion. It reported a Q1 EPS of $1.49, a 15% YoY decline, and below estimates of $1.58. The company reported a 21% YoY decline in net income to $109.6 million.
Other Q1 Highlights
KB Home reported a 9% decline in homes delivered to 2,770 in Q1, while the average selling price increased 4% YoY to $500,700. Home building operating income declined to $127.3 million compared to $157.7 million the previous year, for an operating income margin of 9.2% compared to 10.8% the previous year.
The home builder reported $1.5 million in inventory-related charges, a slight increase from the $1.3 million reported last year. Meanwhile, the housing gross profit margin fell to 20.2% in Q1 2025 compared to 21.5% the previous year, mainly due to higher relative land costs and homebuyer concessions. SG&A expenses as a percentage of housing revenues rose to 11% in the quarter, compared to 10.8% last year.
KB Home ended the quarter with 2,772 in net new orders, a 17% decline YoY, leading to a decline in backlog homes to 4,436, with a value of $2.20 billion, a 21% YoY decline. The home builder also reported a decline to 3.6 for monthly net orders per community compared to 4.6 the previous year. Additionally, it saw a cancellation rate of 16% as percentage of gross orders compared to 14% the previous year.
Balance Sheet
KB Home has $1.25 billion in total liquidity at the end of the quarter, with inventories up 7% to $5.94 billion. Its investment in land and land development rose 57% YoY to $920.3 million. Lots owned or under contract increased slightly to 78,233 with around 54% owned, and 46% under contract. Its lot portfolio increased 41% YoY from 55,509 the previous year.
The company bought back shares worth $50 million in Q1 2025, with $650 million remaining under its existing share buyback authorization program.
KB Home Guidance
For the full-year, the company is expecting housing revenue of $6.6 billion to $7 billion, below the previous estimate of $7 billion to $7.5 billion, and below analysts’ estimate of $7.07 billion.
KB Home also cut its housing profit margin forecast to 19.2% to 20%, down from the previous forecast of 20% to 21%. Additionally, it narrowed its average selling price guidance to $480,000 to $495,000. It forecasts a homebuilding operating income as a percentage of revenue of around 9.4%. Additionally, it forecasts SG&A expenses as a percentage of housing revenue of 10% to 10.4%.
Market Performance
Following the revenue and earnings miss, KBH shares sank 5.76% during the early morning trading session to $58.23 as of 9:46 AM EDT on March 25, 2025. The stock is down 11.67% YTD and 15.13% in the past 12 months. Over the past six months, it has sunk 29.85%.
Its current price is below both its 50- and 200-day moving averages of $60.07, and $74.16 respectively. Looking at the short interest, short sellers hold 9.19% of the float, and 6.45% of the shares outstanding.
Analysts are cautiously optimistic about the future of KBH shares, giving them a moderate buy rating. They forecast an average price of $76.35, which is a 31.34% upside. The analysts give a wide range of forecasts, with a high of $97 and a low of $60.
Is KBH A Buy
Despite the current headwinds, the modest forward P/E ratio of 7.36, and a 40-year streak of consistent dividend payouts signal that its fundamentals are strong. While the initial revenue guidance has been lowered, the long term performance of KBH could still potentially beat the market. Consequently, the recent dip in the stock price could potentially present a buying opportunity.
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