KB Home shares declined early Wednesday as the homebuilder's fiscal third-quarter earnings fell short of market estimates while net orders remained flat year over year. Earnings increased to $2.04 a share for the quarter ended Aug. 31 from $1.80 the year before, the company said late Tuesday. The consensus on Capital IQ was for GAAP EPS of $2.06.
Shares of the company fell 7.1% in premarket activity. Revenue advanced 10% year over year to $1.75 billion, topping the Street's view for $1.73 billion. Home deliveries rose 8% to 3,631, while the average selling price inclined 3% to $480,900. Housing gross profit margin fell to 20.6% from 21.5% in the prior-year period due to product and geographic mix shift of homes delivered, as well as the impact of pricing adjustments to support demand, among other factors, Chief Financial Officer Jeff Kaminski said on an earnings call, according to a Capital IQ transcript.
Net orders remained almost flat at 3,085. "We experienced variability in demand across the quarter, with softening in late June through July, as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising," Chief Executive Jeffrey Mezger said in a statement.
"As rates moderated in August, our net orders improved." For the 2024 fiscal full year, KB Home now anticipates its housing gross profit margin to be in a range of 21.1% to 21.2%, reflecting a lower top end than the prior forecast's estimate of $21.5. Housing revenue is pegged at $6.85 billion to $6.95 billion, up from the prior guidance of $6.7 billion to $6.9 billion. "While we navigate current market dynamics, we continue to position our company to accomplish our longer-term objectives of profitably expanding our scale and driving higher returns," according to Mezger.
"At the same time, we are maintaining a balanced approach in redeploying our cash toward reinvesting in our growth and returning capital to our stockholders." For the current quarter, the company expects housing revenue of between $1.94 billion and $2.04 billion, and a year-over-year increase of $23,000 in its average selling price to roughly $510,000, Kaminski said on the call.
KB Home also forecasts a sequential housing gross profit margin improvement in the quarter, with the metric expected to be in a range of 21% to 21.4%, the CFO told analysts. Price: 81.75, Change: -5.68, Percent Change: -6.50.