KB Home's Q3 Earnings Beat Expectations, But Analysts Cautious On Q4 Margins

Shares of KB Home KBH came under pressure in early trading on Tuesday, after the company reported a decline in sales for its fiscal third quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

Wedbush On KB Home

Analyst Jay McCanless maintained an Outperform rating, while reducing the price target from $64 to $55.

KB Home’s closings in the quarter were ahead of expectations “on lower cycle times and pulled some closings into F3Q23 from F4Q23,” McCanless said in a note. While this pull-forward generated a higher-than-expected gross margin of 21.5%., this would have a “negative impact on F4Q23's gross margin with KB forecasting 20.5% versus our prior 21.4%,” he added.

“KB now expects F4Q23 to be the inflection point for gross margins versus the previous forecast of F3Q23,” the analyst further wrote.

Check out other analyst stock ratings.

RBC Capital Markets On KB Home

Analyst Mike Dahl reiterated a Sector Perform rating and price target of $52.

While KB Home’s orders were short of expectations, the fiscal fourth-quarter gross margin guidance was “also underwhelming,” Dahl said in a note. “Initial FY’24 revenue guide is in-line with street and above our est., but we remain modestly below given lower backlog and comm. count to start the year,” he added.

The analyst raised the earnings estimates for fiscal 2023 and 2024 from $6.38 per share to $6.77 per share and from $6.68 per share to $7.04 per share, respectively, to reflect the third-quarter revenue beat.

KBH Price Action: Shares of KB Home were down 2.83% to $46.74 at the time of publication Thursday.

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