KB Home Earnings Beat, Backlog Shrinks
KB Home earnings topped estimates, but falling deliveries, a smaller backlog and margin pressure left investors cautious and weighed on shares.
KEY TAKEAWAYS
- KB Home beat Q4 estimates with $1.69B revenue and $1.92 adjusted EPS.
- Deliveries fell to 3,619 homes and backlog shrank to $1.4B, signaling softer demand and margin pressure.
- Guidance targets 11,000-12,500 deliveries and $5.1B-$6.1B in housing revenue for FY2026.
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KB Home earnings showed an upside surprise when the company reported fiscal fourth-quarter results on Dec. 18, 2025, but weaker deliveries, lower selling prices, and a shrinking backlog signaled softer demand and compressed margins heading into 2026.
Fourth-Quarter Results and Demand Indicators
The company reported fourth-quarter revenue of $1.69 billion and adjusted earnings per share (EPS) of $1.92, both exceeding analysts’ estimates of $1.66 billion and $1.79. Net income declined 46.7% year over year to $101.5 million, while GAAP diluted EPS fell about 39% to $1.55.
Operational metrics pointed to weaker demand. Home deliveries totaled 3,619 units, down 9% year over year. Net orders dropped roughly 10% to 2,414 units, with order value falling to $1.1 billion from $1.32 billion. The average selling price eased 7% to $465,600. Housing gross profit margin declined 310 basis points to 17.0% (17.8% adjusted), and the homebuilding operating-income margin measured 6.9%. The homebuilder backlog value ended at $1.4 billion.
For the full fiscal year, revenue totaled $6.24 billion, down from $6.93 billion. Deliveries fell to 12,902 homes from 14,169. The average selling price was $481,400, down from $486,900. Full-year EPS declined to $6.15 from $8.45. Inventories rose 3% to $5.67 billion. The company averaged 268 communities during the year, ending with 271.
Guidance and Capital Strategy
KB Home’s guidance for fiscal 2026 projects housing revenue between $5.1 billion and $6.1 billion, with deliveries of 11,000 to 12,500 units. First-quarter revenue is expected between $1.05 billion and $1.15 billion, with deliveries of 2,300 to 2,500 units. Management anticipates the first quarter will be the low point for margins, with improvement thereafter. The effective tax rate is forecast at 24.0% to 26.0%. The company plans to open 35 to 40 new communities in the first quarter and disclosed an additional $100 million in planned share repurchases.
Management linked the outlook to weak consumer confidence, affordability pressures, and elevated mortgage rates, emphasizing a focus on asset optimization, affordable homes, and cost alignment.
On capital and liquidity, KB Home repurchased $100 million of stock in the quarter, about 9.4 million shares at an average price of $57.37. Fiscal-year buybacks totaled roughly $538.5 million to $600 million, leaving about $900 million of repurchase authorization. The company added a $1.2 billion revolving credit facility and reported cash and equivalents of $228.6 million, inventories of $5.67 billion, and a debt-to-capital ratio of 30.3%.
