KB Home (KBH) Gears Up for Q2 Earnings: What's in Store? (2024)

KB Home (KBH - Free Report) is slated to report second-quarter fiscal 2024 results (ended May 31) on Jun 18, after the closing bell.

In the last reported quarter, KB Home's earnings and revenues beat the Zacks Consensus Estimate by 12.8% and 1.2%, respectively. On a year-over-year basis, revenues and earnings increased 6% and 21%, respectively. The company’s earnings topped analysts’ expectations in 30 of the trailing 33 quarters.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings has decreased to $1.78 per share from $1.79 over the past 60 days. The projected figure indicates a decrease of 8.3% from the year-ago quarter’s earnings of $1.94 per share. The consensus estimate for revenues is pegged at $1.64 billion, implying a decline of 7.2% from the prior-year quarter.

Factors at Play

Revenues: KB Home’s top line in second-quarter fiscal 2024 is likely to have been hurt by dismal Housing revenues primarily due to a decline in deliveries. We expect total deliveries in the quartet to decline 7.9% year over year. Consumers’ confidence level, prevailing economic conditions and interest rates are hurting the industry.

However, KB Home's focus on reducing build time, implementing incremental cost reductions through value engineering and increasing community count to facilitate long-term grand openings is likely to have aided its performance. For the second quarter of fiscal 2024, KB Home expects absorption rates to be consistent with or slightly higher than the 5.3 orders per month achieved in the second quarter of fiscal 2023.

The company expects housing revenues in the range of $1.6-$1.7 billion compared with the year-ago figure of $1.75 billion. KBH anticipates the average selling price (“ASP”), to be $483,000, indicating an increase from $479,500 reported a year ago.

We expect housing revenues to decline 7.4% year over year to $1.62 billion in the quarter. We expect ASP to increase 0.6% to $482,200.

Margins: Although initiatives like the Returns-Focused Growth Plan and Built-to-Order approach are positives, increasing construction and labor costs are likely to put pressure on the bottom line.

The company anticipates that the housing gross margin for the second quarter of 2024 will fall between 20.5% and 21%. This projection accounts for the concessions provided to homebuyers in the latter half of last year, which were influenced by the challenging market conditions at that time and is expected to close in this quarter.

Selling, general & administrative expenses, as a percentage of housing revenues, are likely to be 10.5% (up from the year-ago figure of 9.6%). It indicates an effective tax rate of approximately 24%.

Orders & Backlogs: We anticipate that new orders will increase to 4,164 units, up from 3,936 units in the previous year. With a limited supply of pre-owned homes available, homebuyers are turning their attention to builders who have increased their construction efforts to meet the rising demand. KB Home, along with other homebuilding companies, has benefited significantly from this trend, despite ongoing challenges.

We expect the backlog to be 6,583 units, implying a notable fall from 7,286 units reported in the prior-year quarter.

KB Home Price and EPS Surprise

KB Home price-eps-surprise | KB Home Quote

What Our Model Indicates

Our proven model predicts an earnings beat for KB Home this time around. This is because a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: KB Home has an Earnings ESP of +0.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: KB Home currently has a Zacks Rank #2.

Other Stocks With the Favorable Combination

Here are some other companies in the Construction space that, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported.

Dycom Industries, Inc. (DY - Free Report) has an Earnings ESP of +2.59% and currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DY is expected to register an increase of 3.9% in earnings on 12.5% higher revenues for the to-be-reported quarter. The company reported better-than-expected earnings in three of the last four quarters and missed the other one, the average surprise being 30.2%.

Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +2.67% and presently carries a Zacks Rank #3.

PWR is expected to register a 13.3% increase in earnings on 9.4% higher revenues for the to-be-reported quarter. The company reported better-than-expected earnings in three of the last four quarters and missed the other one, the average surprise being 4.7%.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +0.28% and presently carries a Zacks Rank #3.

URI’s earnings for the to-be-reported quarter are expected to be up 6.3% on 6.1% higher revenues from the year-ago level. The company reported better-than-expected earnings in each of the last four quarters, the average surprise being 6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

KB Home (KBH) Gears Up for Q2 Earnings: What's in Store? (2024)
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