KB Home’s Stock Sinks On Weak Outlook

The stock of KB Home (KBH) is sliding lower after the U.S. homebuilder cut its full-year guidance, saying it expects further weakness in the real estate market.

The disappointing outlook overshadowed what was otherwise a strong print from KB Home.

The Los Angeles, California-based company announced fiscal second-quarter earnings per share (EPS) of $1.50 U.S., which beat the consensus estimate of $1.47 U.S.

Revenue for the quarter ended May 31 was $1.53 billion U.S., beating the $1.51 billion U.S. expected on Wall Street.

However, both the top and bottom-line numbers reported for fiscal Q2 were lower than a year ago, when the company’s EPS came in at $2.15 U.S. and its sales totaled $1.71 billion U.S.

KB Home also lowered its full-year guidance, saying it now expects revenue of $6.30 billion U.S. to $6.50 billion U.S., down from $6.60 billion U.S. to $7 billion U.S. previously.

The company’s homebuilding operating margin fell to 9% from 11.1% a year earlier in the latest quarter. Also, housing gross profit fell to 19.3% from 21.1% a year ago.

In the company’s earnings release, KB Home’s CEO Jeffrey Mezger said, “We are scaling back our land acquisition and development investments while increasing share repurchases.”

KB Home bought back $200 million U.S. worth of common stock at an average price of $54 U.S. per share in the just completed quarter.

Mezger said the company plans to continue repurchasing shares during the rest of this year.

The average selling price of a KB Home property was $488,700 U.S. during the quarter, down from $500,700 U.S. in the previous quarter amid ongoing softness in the real estate market.

Net orders declined 13% year-over-year to 3,460 and net order value fell 21% to $1.61 billion U.S.

KBH stock has declined 18% this year to trade at $53.09 U.S. per share.