KB Home saw better demand for its homes as mortgage rates dropped
By Claudia Assis
KB Home stock drops 6%, however, as builder misses Wall Street expectations for its quarterly profit
Homebuilder KB Home said late Tuesday that as mortgage rates dropped recently, it saw a "strengthening in demand" in August that it expects will carry into the rest of the year.
For the here and now, however, that message of optimism was not quite resonating with investors: The stock dropped around 6% in the extended session, after KB Home (KBH) reported a quarterly profit miss.
Net orders were flat as compared with the year-ago quarter, and KB Home saw softening demand in late June through July "as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising," Chief Executive Jeffrey Mezger said in a statement.
"As rates moderated in August, our net orders improved. We are encouraged by this strengthening in demand for our affordably priced personalized homes, and the ongoing positive trend we are experiencing so far in our 2024 fourth quarter," Mezger said.
KB Home earned $157.3 million, or $2.04 a share, in the third quarter, compared with $149.9 million, or $1.86 a share, in the year-ago period. That was below the FactSet consensus of $2.06 a share, however.
Revenue grew 10% to $1.75 billion, ahead of expectations of $1.73 billion.
The company said it delivered 3,631 homes in the quarter, up 8%, and the their average selling price rose 3% to $480,900.
KB Home also tweaked its expectations for 2024 housing revenue and the average selling price of its homes.
It sees housing revenue in a range between $6.85 billion and $6.95 billion for the year. That compares with a previous expectation of between $6.70 billion and $6.90 billion
It expects an average selling price of about $490,000, versus a prior guidance of between $485,000 and $495,000.
Shares of KB Home have gained nearly 40% so far this year, compared with an advance of about 20% for the S&P 500 index SPX.
-Claudia Assis
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09-24-24 1701ET
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