KB Home Stock Slides Over 2% Premarket Despite Q4 Beat: What's Going On?

Shares of KB Home KBH, the Los Angeles-based homebuilder, experienced a premarket decline on Thursday. 

The company’s fourth-quarter revenue, disclosed after Wednesday’s market close, showed a 14% year-over-year decrease to $1.67 billion. Despite this dip, it exceeded the consensus estimate of $1.62 billion. KB Home reported a 10% drop in home deliveries and a 4.52% decrease in the average selling price to 3,407 homes and $487,300, respectively.

The bottom line came in at $1.85 per share, down from $2.47 per share but surpassed the consensus estimate of $1.69 per share. Looking forward, the company guided 2024 revenue in the range of $6.40 billion to $6.80 billion, aligning with the consensus estimate of $6.58 billion. KB Home expects the average selling price to range between $480,000 and $490,000, with a homebuilding operating margin of 11%, matching the fourth quarter’s 10.9%.

The Federal Reserve’s decision to raise rates to a 22-year high of 5.25%-5.50% influenced mortgage rates, rendering homeownership less affordable for buyers.

Seaport analyst Kenneth Zener downgraded the stock from Buy to Neutral and assigned a price target of $8.55. 

‘We acknowledge KB Home’s past success, but as it pivots to ‘growth mode’ in FY24, we see a balanced risk to return for the stock prospectively, as capital funds growth vs buybacks, amid flat gross margins (21%) guidance, supporting our Neutral from Buy rating change,” the analyst said.

In premarket trading, the stock fell 2.45% to $61.65, according to Benzinga Pro data.

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