KB Home (KBH) to Report Q1 Earnings: What's in the Offing?
KB Home KBH is slated to report first-quarter fiscal 2024 results (ended Feb 29) on Mar 20, 2024, after market close.
In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 9.5% and 4.1%, respectively. On a year-over-year basis, revenues and earnings decreased 13.7% and 25.1%, respectively.
The company’s earnings topped analysts’ expectations in 29 of the trailing 32 quarters.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings has increased to $1.56 per share from $1.51 over the past 60 days. The projected figure indicates a 7.6% increase from the year-ago quarter’s earnings of $1.45 per share. The consensus estimate for revenues is pegged at $1.45 billion, suggesting growth of 4.8% from the prior-year quarter’s levels.
KB Home Price and EPS Surprise
KB Home price-eps-surprise | KB Home Quote
Factors at Play
Revenues: KB Home’s housing revenues are expected to have increased in the fiscal first quarter from a year ago, thanks to the improving demand trend given lower interest rates and focus on the built-to-order model. Also, KB Home continues to prioritize reducing build times, implementing incremental cost reductions through value engineering, and increasing community count to facilitate long-term grand openings. In 2024, the company plans to intensify its investment efforts to support future growth while maintaining focus on underwriting criteria, product strategy, and pricing.
The company expects housing revenues in the range of $1.4-$1.5 billion compared with the year-ago figure of $1.38 billion. KBH anticipates the average selling price, or ASP, to be $477,000, suggesting a decline from $494,500 reported a year ago.
We expect housing revenues to grow 1.7% year over year to $1.4 billion in the quarter. We expect ASP to decrease 3.4% to $477,500 in the quarter.
We expect home deliveries to be 2,935 units, suggesting 5.3% growth from the year-ago quarter’s level of 2,788 units.
Margins: Although initiatives like the Returns-Focused Growth Plan and Built-to-Order approach are positives, higher material and labor costs are likely to have put pressure on the bottom line.
Assuming no inventory-related charges, KB Home expects the fiscal first-quarter housing gross margin to be 21% versus 21.8% reported a year ago.
Selling, General & Administrative expenses, as a percentage of housing revenues, are likely to be 10.5% (up from the year-ago figure of 10.1%). It projects an effective tax rate of approximately 24%.
The company expects the homebuilding operating margin to be 10.5%. This compares unfavorably with the year-ago figure of 11.7%.
Orders & Backlogs: We expect new orders to grow to 3,069 units from 2,142 units a year ago. Homebuyers are encountering a limited supply of pre-owned homes on the market, prompting them to shift their focus toward builders who have ramped up their construction efforts to meet this growing demand. KB Home, like other homebuilding companies, has been riding high on this tailwind despite the continuous challenges.
We expect the backlog to be 5,644 units, implying a notable fall from 7,016 units reported in the prior-year quarter.
What Our Model Indicates
Our proven model does not conclusively predict an earnings beat for KB Home this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here.
Earnings ESP: KB Home has an Earnings ESP of 0.00%. 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.
Stocks With Favorable Combination
Here are some companies in the Zacks Construction sector, which, according to our model, have the right combination of elements to post an earnings beat for their respective quarters to be reported.
Martin Marietta Materials, Inc. MLM has an Earnings ESP of +2.32% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
MLM is expected to register a 7.9% decline in earnings for the to-be-reported quarter. Notably, MLM reported better-than-expected earnings in all the last four quarters, with the average surprise being 41.5%.
United Rentals, Inc. URI has an Earnings ESP of +1.21% and a Zacks Rank #3.
URI’s earnings for the to-be-reported quarter are expected to grow 5%. The company reported better-than-expected earnings in three of the last four quarters and missed on another occasion, with the average surprise being 3.1%.
Dycom Industries, Inc. DY has an Earnings ESP of +6.30% and a Zacks Rank #3.
DY’s earnings for the to-be-reported quarter are expected to decline 24.3%. The company reported better-than-expected earnings in three of the last four quarters and missed on another occasion, with the average surprise being 53.9%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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KB Home (KBH) : Free Stock Analysis Report
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United Rentals, Inc. (URI) : Free Stock Analysis Report
Dycom Industries, Inc. (DY) : Free Stock Analysis Report
