KB Home Gets Negative Reactions From Wall Street on Weak Revenue

KB Home reports a 57% drop in net home orders during the fiscal second quarter.
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KB Home  (KBH) - Get Report shares plunged after weak revenue data triggered negative reactions about the homebuilder from analysts.

For the quarter ended May 31, KB reported a 57% drop in net home orders from the year-earlier quarter. Revenue dropped to $914 million from $1.02 billion last year, trailing FactSet’s consensus analyst forecast of $1.07 billion.

Earnings were 55 cents a share in the latest quarter, beating analysts’ forecast of 51 cents.

Credit Suisse called the second-quarter results and outlook “unexpectedly weak."

The “pretty shocking” drop in quarterly orders and the 2% order growth for the first three weeks of June were “disappointing,” compared to what’s happening at Lennar  (LEN) - Get Report, Credit Suisse analysts said.

Still, gross margins came in “much better” than they forecast, offsetting the bad news, they said. They have an outperform rating and $36 price target on the stock.

Evercore ISI cut its rating to in-line from outperform and its price target to $33 from $39. The latest quarter was mixed, and KB’s build-to-order strategy may make things more difficult amid the coronavirus pandemic, Evercore analysts said.

Keefe, Bruyette Woods has a market perform rating on KB Home with a $25 price target.

“Worse-than-expected 2Q orders and cancellation trends, coupled with the recent spike in Covid-19 cases in certain states could prompt investors to question the sustainability” of the improvement shown in June, the analysts said in a commentary cited by Bloomberg.

KB shares recently traded at $29.51, down 11.46%. The stock has soared 89% over the last three months.