Homebuilder KB Home's Q3: Earnings Beat, 14% Topline Decline, Lower Average Selling Price & More

KB Home KBH reported a third-quarter FY23 sales decline of 13.9% year-on-year to $1.59 billion, beating the analyst consensus of $1.48 billion.

Homes delivered in the quarter decreased 7% to 3,375, and the average selling price fell 8.3% to $466,300.

The housing gross profit margin decreased 520 basis points to 21.5%. The homebuilding operating margin contracted 640 basis points to 11.3%, and the homebuilding operating income for the quarter plunged 44.8% to $179.2 million.

Selling, general and administrative expenses as a percentage of housing revenues increased 130 basis points to 10.2% due to reduced operating leverage from lower housing revenues and higher sales commissions.

Net orders for Q3 grew 52% to 3,097, and net order value rose 54% to $1.51 billion. Ending backlog homes totaled 7,008, compared to 10,756.

The company held $612.1 million in cash and equivalents as of August 31, 2023.

Inventories totaled $5.19 billion, down 6%, reflecting lower land-related investments in the 2023 first half and compressed build times driving additional deliveries. Sequentially, inventories were up slightly from the 2023 second quarter.

EPS of $1.80 beat the analyst consensus of $1.43.

"Demand was steady throughout the quarter, leading to a community absorption pace of 4.3 net orders per month, even though mortgage interest rates rose as the quarter progressed," said Chairman, President and CEO Jeffrey Mezger.

"With the choice, flexibility and affordability that our Built to Order model offers to our buyers, we believe we are well positioned to navigate the potential for shifting housing market conditions."

Outlook: KB Homes sees FY23 housing revenue of $6.31 billion, up from the prior view of $5.80 billion-$6.20 billion.

Average selling price is expected to be approximately $481,000 (prior view $485,000).

Price Action: KBH shares closed lower by 0.72% at $48.06 on Wednesday.