KBH

Comfort Systems USA, Inc. (FIX delivered impressive third-quarter 2026 results, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing sharply year over year. The quarterly performance reflected robust demand across technology-related projects, strong execution and continued expansion in construction activity. Backlog reached $17.81 billion, reinforcing management's confidence in sustained growth and profitability. FIX shares dipped more than 6% in after-hours trading on Thursday, Oct. 22, 2026, following the release of its third-quarter 2026 results. The decline reflected concerns over the absence of forward guidance and the company's CFO transition. The company announced that longtime chief financial officer Bill George will retire after the filing of its 2026 annual report, ending a 30-year tenure. Julie Shaeff, currently chief accounting officer, will succeed him. Comfort Systems USA, Inc. price-consensus-eps-surprise-chart | Comfort Systems USA, Inc. Quote The company reported earnings per share of $13.91, which topped the Zacks Consensus Estimate of $12.71 by 9.4% and increased 68.6% from $8.25 reported in the year-ago quarter. Revenues of $3.77 billion surpassed the consensus mark of $3.35 billion by 12.5% and rose 53.7% from $2.45 billion generated in the prior-year quarter. The improvement reflected strong demand, increased project activity and contributions from acquired businesses. Comfort Systems generated Mechanical segment (which accounted for 68.6% of total revenues in the quarter) revenues of $2.58 billion in the third quarter, up 42.7% from $1.81 billion in the prior-year quarter. The segment's operating income increased 63.2% to $469.6 million from $287.8 million a year ago. The Electrical segment's revenues (which accounted for 31.4% of total revenues) surged 84.8% year over year to $1.18 billion from $640.5 million. Segment operating income climbed 60.4% to $173.6 million, supported by increased activity across electrical contracting operations. Technology customers accounted for 60.8% of consolidated revenues compared with 45.8% a year ago. Manufacturing represented 16.8%, followed by healthcare at 6.3%, education at 4.6% and government at 3.7%. New construction contributed 76.2% of quarterly revenues, up from 65.2% in the year-ago period. Existing building construction accounted for 14%, while service projects and service calls, maintenance and monitoring represented 5.1% and 4.7%, respectively. Backlog as of Sept. 30, 2026, totaled $17.81 billion, increasing 26.7% from $14.06 billion at June 30, 2026, and jumping 90% from $9.38 billion reported a year ago. On a same-store basis, backlog climbed to $17.39 billion from $9.38 billion in the prior-year period, highlighting substantial organic growth in the company's project pipeline. Management attributed the strong order momentum to sustained demand and the company's execution capabilities. Approximately 65-75% of remaining construction performance obligations are expected to be recognized as revenues over the next 12 months, providing visibility into future business activity. Gross profit increased 53.7% to $934.5 million from $607.9 million a year ago. Gross margin remained stable at 24.8%, reflecting consistent profitability despite the significant expansion in revenues. Selling, general and administrative expenses increased 36.8% to $314.2 million. However, SG&A expenses as a percentage of revenues improved to 8.3% from 9.4%, indicating better expense absorption as business volumes expanded. Operating income surged 64.8% to $624.6 million from $378.9 million in the prior-year quarter. Operating margin expanded 110 basis points to 16.6%. Adjusted EBITDA increased 61.4% to $667.9 million from $413.9 million. Adjusted EBITDA margin improved 80 basis points to 17.7%, reflecting stronger operating profitability. As of Sept. 30, 2026, Comfort Systems had cash and cash equivalents of $2.16 billion, up from $981.9 million at 2025-end. Total debt declined to $49.6 million from $145.2 million, strengthening the company's financial flexibility. During the quarter, net cash provided by operating activities increased 82.6% to $1.01 billion from $553.3 million a year earlier. Free cash flow rose to $805.6 million from $519 million, despite higher capital expenditures. The company also paid dividends of 90 cents per share during the quarter, compared with 50 cents a year ago. Share repurchases totaled $340.9 million, reflecting continued shareholder returns alongside investments in business expansion. Comfort Systems' management maintained a positive outlook, supported by strong customer demand, an expanding project pipeline and consistent operating execution. The company expects to sustain organic growth, high profitability and solid cash generation through the remainder of 2026 and into 2027. Management emphasized that continued demand and workforce capabilities position the business to capitalize on opportunities across its key markets. Recent acquisitions also expanded the company's operating capabilities. During the third quarter, Comfort Systems acquired Boys Electrical Contractors in Florida and a Texas-based modular construction business, strengthening its presence across electrical services and customized building components. Comfort Systems currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. KB Home KBH reported third-quarter fiscal 2026 earnings of $1.05 per share, beating the Zacks Consensus Estimate of 88 cents by 19.3%. Earnings declined 34.8% from $1.61 per share in the year-ago quarter. KBH's total revenues of $1.30 billion surpassed the consensus mark of $1.29 billion by 0.4% but dropped 20% year over year. Results reflected lower deliveries and continued pricing pressure, partly offset by progress in the company's Built to Order model. BTO homes represented 74% of deliveries, supporting sequential improvement in housing gross margin. Lennar Corporation LEN reported weaker-than-expected third-quarter fiscal 2026 (ended Aug. 31) results. Adjusted earnings of $1.23 per share missed the Zacks Consensus Estimate of $1.29 by 4.7% and fell 38.5% from $2.00 per share a year ago. Lennar's total revenues of $8.05 billion missed the consensus estimate of $8.33 billion by 3.4% and declined 8.6% year over year. Lower deliveries and home prices weighed on results amid affordability pressure. Inventory turn stood at 2.4 times. United Rentals, Inc. URI reported third-quarter 2026 results, with adjusted earnings per share and total revenues beating the Zacks Consensus Estimate and increasing year over year. URI's adjusted earnings of $15.55 per share topped the Zacks Consensus Estimate of $13.83 by 12.4% and grew 32.9% year over year from $11.70 per share. URI's total revenues rose 15.7% year over year to $4.89 billion and surpassed the consensus estimate of $4.69 billion by 4.3%. United Rentals management raised its revenue outlook to $18-$18.2 billion from $17.5-$17.8 billion. Adjusted EBITDA is now projected at $8.3-$8.4 billion compared with $7.98-$8.13 billion previously. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report KB Home (KBH) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report United Rentals, Inc. (URI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

PulteGroup, Inc. PHM reported weaker-than-expected third-quarter 2026 results, with earnings and total revenues missing the Zacks Consensus Estimate and declining year over year. Earnings fell 14.5%, while revenues decreased 9.8% from the prior-year quarter. The quarterly performance reflected lower home-closing volumes, softer average selling prices (ASP) and margin compression. Persistently challenging housing affordability, rising mortgage rates and inflation weighed on homebuyer demand. Net new orders declined year over year, although the company's backlog increased in both units and dollar value. PHM stock plunged almost 6% following the earnings release. Quarterly earnings were $2.53 per share, missing the Zacks Consensus Estimate of $2.63 by 3.8%. Earnings fell from $2.96 per share in the prior-year quarter. Total revenues (Homebuilding & Financial Services) of $3.97 billion lagged the consensus mark of $4.13 billion by 3.9% and decreased 9.8% from $4.40 billion in the year-ago period. Net income declined 18.8% year over year to $475.7 million from $585.8 million. Income before income taxes fell 18.6% to $625.2 million, reflecting weaker homebuilding profitability. PulteGroup, Inc. price-consensus-eps-surprise-chart | PulteGroup, Inc. Quote Homebuilding segment revenues decreased 10.1% year over year to $3.87 billion. Home sale revenues declined 9.2% to $3.86 billion, primarily reflecting lower home-closing volumes and a modest reduction in average selling prices. Land sale and other revenues dropped to $7.8 million from $53.2 million. The number of homes closed fell 8.7% year over year to 6,876 units. Deliveries declined across all six geographic regions, with the West and Northeast witnessing particularly pronounced contractions. The ASP of homes delivered slipped 0.5% to $561,000 from $564,000. Homebuilding income before income taxes decreased 19.9% year over year to $579.6 million from $723.4 million. The decline reflected reduced sales volumes and continued pressure on home-sale margins. Net new orders declined 6.5% year over year to 6,208 homes from 6,638. Orders increased in Florida but decreased across the remaining five geographic regions. The average community count rose 7% to 1,077, indicating that a larger selling footprint did not translate into higher overall orders. The dollar value of net new orders fell 3.9% to $3.50 billion from $3.64 billion in the prior-year quarter. PulteGroup ended the quarter with a backlog of 10,298 homes, up 4.1% year over year. Backlog units increased in the Northeast, Florida, Midwest and Texas, while the Southeast and West recorded declines. The value of homes in the backlog rose 3.4% to $6.44 billion, indicating a modest increase in the company's future home-delivery pipeline despite softer current-quarter demand. Home sale gross margin contracted 140 basis points (bps) year over year to 24.8% from 26.2%. The reported margin included $26 million of land impairments, representing approximately 70 bps of margin pressure. Selling, general and administrative (SG&A) expenses declined to $397.2 million from $400.7 million. However, as a percentage of home sale revenues, SG&A expenses increased 90 bps to 10.3%, reflecting reduced operating leverage amid lower revenues. Management emphasized its strategy of balancing home pricing and sales pace while aligning production with demand conditions. Move-up and active-adult buyers accounted for more than 60% of the company's business, supporting its focus on maintaining profitability amid housing-market challenges. Financial Services revenues increased 3.7% year over year to $107 million from $103.3 million. Segment income before income taxes improved 2.7% to $45.6 million from $44.4 million. Mortgage origination volume declined 7.2% to 4,438 loans from 4,782, while origination principal fell 6.5% to $1.92 billion from $2.05 billion. The mortgage capture rate improved to 84.6% from 84.4%, reflecting a slightly higher proportion of eligible homebuyers using the company's mortgage services. PulteGroup ended the quarter with $1.41 billion in cash, cash equivalents and restricted cash, down from $2.01 billion at 2025-end. Notes payable totaled $1.81 billion, resulting in a debt-to-capital ratio of 12.1% and a net debt-to-capital ratio of 3%. Operating cash flow for the first nine months of 2026 declined 42.1% year over year to $637 million, partly reflecting a $1.15 billion increase in inventories. During the third quarter, PHM repurchased 2.8 million shares for $350 million. For the first nine months, repurchases totaled $1.03 billion, representing approximately 8.4 million shares. The company continued returning capital to shareholders while maintaining a relatively low leverage position. PulteGroup currently has a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. KB Home KBH reported third-quarter fiscal 2026 earnings of $1.05 per share, beating the Zacks Consensus Estimate of 88 cents by 19.3%. Earnings declined 34.8% from $1.61 per share in the year-ago quarter. KBH's total revenues of $1.30 billion surpassed the consensus mark of $1.29 billion by 0.4% but dropped 20% year over year. Results reflected lower deliveries and continued pricing pressure, partly offset by progress in the company's Built to Order model. BTO homes represented 74% of deliveries, supporting sequential improvement in housing gross margin. Lennar Corporation LEN reported weaker-than-expected third-quarter fiscal 2026 (ended Aug. 31) results. Adjusted earnings of $1.23 per share missed the Zacks Consensus Estimate of $1.29 by 4.7% and fell 38.5% from $2.00 per share a year ago. Lennar's total revenues of $8.05 billion missed the consensus estimate of $8.33 billion by 3.4% and declined 8.6% year over year. Lower deliveries and home prices weighed on results amid affordability pressure. Inventory turn stood at 2.4 times. United Rentals, Inc. URI reported third-quarter 2026 results, with adjusted earnings per share and total revenues beating the Zacks Consensus Estimate and increasing year over year. URI's adjusted earnings of $15.55 per share topped the Zacks Consensus Estimate of $13.83 by 12.4% and grew 32.9% year over year from $11.70 per share. URI's total revenues rose 15.7% year over year to $4.89 billion and surpassed the consensus estimate of $4.69 billion by 4.3%. United Rentals management raised its revenue outlook to $18-$18.2 billion from $17.5-$17.8 billion. Adjusted EBITDA is now projected at $8.3-$8.4 billion compared with $7.98-$8.13 billion previously. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PulteGroup, Inc. (PHM) : Free Stock Analysis Report KB Home (KBH) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report United Rentals, Inc. (URI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

A month has gone by since the last earnings report for KB Home (KBH). Shares have lost about 8.8% in that time frame, underperforming the S&P 500. But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is KB Home due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. KB Home reported third-quarter fiscal 2026 earnings of $1.05 per share, beating the Zacks Consensus Estimate of 88 cents by 19.3%. Earnings declined 34.8% from $1.61 per share in the year-ago quarter. Total revenues of $1.30 billion surpassed the consensus mark of $1.29 billion by 0.4% but declined 20% year over year. Results reflected lower deliveries and continued pricing pressure, partly offset by progress in the company's Built to Order model. BTO homes represented 74% of deliveries, supporting sequential improvement in housing gross margin. Housing revenues totaled $1.29 billion, down 20% from $1.61 billion in the prior-year quarter. The decline primarily reflected a 19% decrease in homes delivered and a modest decline in the overall average selling price (ASP). Homes delivered were 2,732 compared with 3,393 a year ago. The backlog conversion rate was 60% compared with 71% in the prior-year period, reflecting the shift toward a higher mix of Built to Order homes. The ASP was $473,000 compared with $475,700 a year ago. Net orders decreased 12% year over year to 2,604 homes, while net order value fell 8% to $1.21 billion. Monthly net orders per community declined to 3.1 from 3.8, reflecting a more cautious homebuying environment. The cancellation rate increased to 18% of gross orders from 17%. However, average community count rose 8% to 279, while ending community count increased 5% to 277. Management cited higher mortgage rates, weaker consumer confidence and affordability pressure as factors weighing on demand. Ending backlog increased year over year for the first time in four years. Backlog rose 2% to 4,398 homes, while backlog value increased 3% to $2.05 billion. The higher backlog provides visibility into future deliveries as the company continues its Built to Order strategy. Homebuilding operating income was $67.1 million compared with $131.2 million a year ago. The corresponding margin contracted to 5.2% from 8.1%. Excluding inventory-related charges, the operating margin was 5.4% compared with 8.8%. Housing gross margin was 16.5%, down from 18.2% a year earlier. Excluding inventory-related charges, adjusted housing gross margin was 16.8% versus 18.9%. The adjusted margin improved from 15.7% in the second quarter, helped by the stronger BTO delivery mix. SG&A expenses represented 11.3% of housing revenues versus 10% a year ago. KBH ended the quarter with total liquidity of $942.4 million, comprising $159 million of cash and $783.4 million of available capacity under its unsecured revolving credit facility. Inventories increased 5% from Nov. 30, 2025, to $5.98 billion. Land and land development investments totaled $722.3 million in the quarter, up 40% year over year. KBH repurchased 0.9 million shares for $50 million during the quarter. The debt-to-capital was 35.7%, while book value per share increased 4% year over year to $62.56. For the fourth quarter of fiscal 2026, KB Home expects deliveries of 3,000-3,500 homes and housing revenues of $1.45-$1.65 billion. Housing gross margin is projected between 16% and 16.6%, assuming no inventory-related charges, while the SG&A ratio is expected to be between 10.3% and 10.9%. The effective tax rate is anticipated to be approximately 26%, with ending community count projected at 270-275.  For fiscal 2026, KB Home continues to expect deliveries of 10,500-11,000 homes, unchanged from its prior outlook. However, the company narrowed its housing revenue guidance to $4.90-$5.10 billion from $4.90-$5.30 billion previously. KBH now expects a housing gross margin of 16-16.2%, assuming no inventory-related charges, compared with its previous projection of 16.1-16.5%. The SG&A expense ratio is now expected at 11.5-11.7%, versus 11.4-11.8% previously. In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.74% due to these changes. Currently, KB Home has a poor Growth Score of F, a score with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for value investors. Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, KB Home has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KB Home (KBH) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

KB Home (KBH) has landed back in the spotlight after reporting third quarter fiscal 2026 results, with sales of US$1,292.35 million and net income of US$65.28 million, alongside fresh housing revenue guidance. KB Home shares have been under pressure despite the latest earnings beat, with the 30-day share price return down 12.24% and the year-to-date share price return down 14.86%. At the same time, the 5-year total shareholder return of 30.84% shows a much stronger long-run picture, suggesting momentum has faded in the short term while longer term holders have still seen meaningful gains. Scan how KB Home compares with other builders facing similar pressure by checking a curated set of list of solid balance sheet and fundamentals (23 results) for comparison. KB Home now trades below the average analyst price target after a sharp pullback, even as its own intrinsic value estimate sits a little higher. Is the discount signaling opportunity, or simply reflecting justified caution around weaker earnings and margin guidance? KB Home’s most followed narrative sets a fair value of $58.25 against the last close of $48.59. The story centers on whether the current discount reflects mispricing or a fair response to slower earnings and margin pressure. See why 14 investors see KB Home as 17% undervalued. This narrative applies a 9.48% discount rate and arrives at that $58.25 fair value while also building in modest long term revenue growth and higher net profit margin assumptions versus today. Analysts behind this view still temper those positives with a lower future P/E multiple of 11.48x. This pulls the valuation back toward the mid $50s even as the underlying model uses slightly more constructive growth and margin inputs. Result: Fair Value of $58.25 (UNDERVALUED) Still, weaker consumer confidence and softer regional markets like Florida could pressure KB Home’s orders and margins enough to challenge the view that the shares are 17% undervalued. Find out about the key risks to this KB Home narrative. There is a sharp contrast once you switch from the analyst narrative to the SWS DCF model. At a share price of $48.59, KB Home is trading well above an estimated future cash flow value of $7.98. This flags the stock as overvalued on this framework and raises the question of which signal investors should trust. Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out KB Home for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 29 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. Sentiment on KB Home is clearly split, which is exactly why fresh eyes matter right now. Move quickly, review both the pressure points and the potential upside, then weigh them together with the 5 key rewards and 3 important warning signs. Do not stop with KB Home. Use this window of time to scan other opportunities that match your risk, income, and value priorities before they move. Target reliable compounders by focusing on businesses that combine quality metrics with attractive pricing through the 29 high quality undervalued stocks. Secure potential income streams by tracking companies that offer higher yields and resilient payout records using the 7 dividend fortresses. Prioritize resilience by filtering for businesses with strong financial footing and clean balance sheets through the list of solid balance sheet and fundamentals (23 results). This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include KBH. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Total Revenues: $1.3 billion in Q3 fiscal 2026. Housing Revenues: $1.3 billion, at midpoint of guidance; down 20% from $1.6 billion year-over-year. Net Income: $65 million, compared to $110 million a year earlier. Diluted EPS: $1.05, versus $1.61 in the prior-year quarter. Homes Delivered: 2,732 homes, a 19% year-over-year decrease. Average Selling Price: $473,000, modestly higher than Q2; Q4 guidance implies ~$480,000. Housing Gross Profit Margin: 16.5%, down from 18.2% year-over-year; up sequentially from Q2. Adjusted Housing Gross Profit Margin: 16.8%, versus 18.9% a year ago; improved sequentially from 15.7% in Q2. Home Building Operating Income: $67 million, or 5.2% of revenues, versus $131 million, or 8.1%, a year earlier. SG&A Ratio: 11.3%, at low end of guidance; up from 10% year-over-year. Pre-Tax Income: $81 million, compared to $143 million a year earlier. Effective Tax Rate: 19.6%, versus 23.3% prior year; Q4 expected ~26%, full year ~23%. Backlog Conversion Rate: 60%, compared to 71% a year ago. Built-to-Order Mix: 74% of deliveries, up from 60% in Q2. Unsold Inventory: 26% of production, down from 41% a year ago; finished unsold homes 9%, down from 16%. Cash: $159 million at quarter end. Total Liquidity: $942 million, including $783 million available under unsecured credit facility. Debt-to-Capital Ratio: 35.7%, compared to 33% a year ago. Inventory: $6 billion, up 5% year-over-year. Lots Owned or Controlled: Over 61,000 lots. Share Repurchases: ~890,000 shares (~1.5% of shares outstanding) at average price below book value; up to $50 million planned for Q4. Capital Returned to Shareholders: Over $65 million in Q3, inclusive of dividends. Book Value Per Share: Over $62. Community Count: Q4 ending community count expected between 270 and 275, roughly in line with prior year. Mortgage Capture Rate: 85%, up slightly from Q2. Average Cash Down Payment: 16%, or about $76,000. Average Buyer Household Income: ~$134,000; average FICO score 742. All-Cash Buyers: ~8% of Q3 deliveries. Build Times: 99 days start-to-completion, 19% faster year-over-year; target of 90 days. Warning! GuruFocus has detected 3 Warning Signs with AYTU. Is KBH fairly valued? Test your thesis with our free DCF calculator. Release Date: September 22, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. KB Home (NYSE:KBH) met or exceeded guidance across all metrics in Q3 2026, with housing revenues of $1.3 billion and diluted EPS of $1.05. The company successfully returned to a predominantly built-to-order model, with BTO homes comprising 74% of deliveries, up from 60% in Q2, driving a sequential improvement in housing gross margin. KB Home (NYSE:KBH) achieved a year-over-year increase in backlog for the first time in four years, providing a foundation for future deliveries. Unsold inventory remains low, with total unsold inventory at 26% of production (down from 41% a year ago) and finished unsold homes at just 9% (down from 16%). Build times improved to an average of 99 days, down 19% year-over-year, enhancing inventory turns and operational efficiency. The company maintains a strong balance sheet with $942 million in total liquidity and a debt-to-capital ratio of 35.7%, supporting growth and shareholder returns. KB Home (NYSE:KBH) returned over $65 million to shareholders in Q3 through share repurchases and dividends, and plans up to $50 million more in Q4 repurchases. The company has a solid land pipeline with over 61,000 owned or controlled lots, positioning it for future growth when market conditions improve. Market conditions weakened since the last earnings call, with rising mortgage rates, persistent inflation, and geopolitical uncertainty dampening consumer demand. Net orders declined year-over-year as sales softened sequentially in July and August, with traffic down and buyers becoming more cautious. Q4 guidance was moderated: average selling price is now expected at ~$480,000 (down from ~$500,000) and gross margin is expected to be about one percentage point lower than prior guidance. Housing gross profit margin declined to 16.5% in Q3 from 18.2% a year ago, reflecting pricing pressures and higher costs. Direct costs are expected to rise sequentially in Q4 due to fuel surcharges, general inflation, and tariffs, pressuring margins. Resale inventory has increased to its highest level in a decade, with pricing starting to decline in more markets, adding competitive pressure. SG&A expense ratio increased to 11.3% from 10% a year ago, due to lower operating leverage, though partially offset by cost reductions. Debt-to-capital ratio rose to 35.7% from 33% a year ago, reflecting increased inventory investments and share repurchases. Q: With KB Home having achieved its goal of returning to a predominantly built-to-order business model, is the long-term gross margin target of 22% still in play?A: Robert McGibney, President and COO, confirmed that 22% remains the target. He noted that current market conditions are not conducive to hitting that margin, but the company is sticking to its underwriting discipline, which has led them to walk away from land deals that no longer meet their return criteria. Q: Given the current market conditions, is the fourth quarter gross margin representative of the mix (built-to-order, Northern/Southern California) we should expect for the first half of 2027?A: Robert McGibney, President and COO, stated that Q4 guidance is based on current conditions. He expects the Southern California mix to rotate back in, as the current weakness was partly due to missed openings of high-ASP communities. While not giving 2027 guidance, he expressed pleasure with the shift back to built-to-order and aligning starts with sales. Q: Can you bridge the gross margin from Q3 to Q4, detailing the puts and takes?A: William Hollinger, CFO, explained that the sequential decline from 16.8% in Q3 to an anticipated 16.3% in Q4 is due to pricing pressures, higher costs, and product/geographic mix (specifically Southern California). These negative factors are expected to more than offset a positive contribution of about 50 basis points from operating leverage. Q: With the shift to built-to-order and a backlog of pre-sold homes, are you forced to offer incentives at the closing table when rates rise, to keep buyers in the deal or help them qualify?A: Robert McGibney, President and COO, said it does happen, but it's minimal. The primary strategy is to lock in buyers' interest rates early in the process, which is easier with the current ~90-day build time. While some minor adjustments are made in backlog, it is not a significant overall cost. Q: Can you provide an update on the pipeline for the high-margin Bay Area communities and how long you expect an outsized contribution from them?A: Robert McGibney, President and COO, said the company is rebuilding its Northern California business to its former strength. He expects a few more quarters of ramping up as new communities come online, after which the business will find a new equilibrium. He expects a mix benefit to continue into 2027. Q: With mortgage rates moving higher, how should we think about your willingness to let the absorption pace drift lower to protect gross margin? Is there a floor?A: Robert McGibney, President and COO, stated that targets are set community by community based on various factors. While the long-term goal is around four sales per month per community, the company is not looking to force that pace at the expense of margin in the current choppy market. The focus is on managing each asset for the best return profile. Q: Can you discuss the increase in land spend this quarter and how we should think about it going forward?A: Robert McGibney, President and COO, explained that the increase is mostly related to development and fees for land that was previously purchased, rather than new raw land acquisitions. This is part of the normal progression of their land pipeline. Q: Can you provide more detail on the value engineering efforts and how they will impact future quarters?A: Robert McGibney, President and COO, described value engineering as an ongoing process, not a one-time event. Current efforts focus on standardization, such as simplifying floor plans and building envelopes, to reduce costs without taking value away from the customer. This is a continuous focus for the architecture team. Q: You mentioned seeing additional pricing pressure from the resale market. Are there specific markets where this is having a more outsized impact?A: Robert McGibney, President and COO, said the impact is very submarket-specific. While markets like Texas and Florida have elevated resale inventory, the competitive pressure varies by community. He noted that sellers are starting to become more realistic with prices, which is a positive sign for the market to find balance. Q: With leverage back at roughly 30%, how much longer can you continue to return more capital to shareholders than you are bringing in on a free cash basis?A: Jeffrey Mezger, CEO, stated that capital allocation is a disciplined balance of land investment, growth appetite, and cash flow. He noted that land spend may come down a little in the current environment, which will influence the pace of share repurchases. The company will remain programmatic and opportunistic while maintaining a solid balance sheet. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Tuesday, Sept. 22, 2026 Executive Chairman - Jeffrey Mezger President and Chief Executive Officer - Rob McGibney Senior Vice President and Chief Accounting Officer - Bill Hollinger Senior Vice President and Treasurer - Thad Johnson Senior Vice President, Investor Relations - Jill Peters Operator: Good afternoon. My name is John, and I'll be your conference operator today. I'd like to welcome everyone to the KB Home 2026 Third Quarter Earnings Conference Call. [Operator Instructions] This conference call is being recorded and a replay will be accessible on the KB Home website until October 22, 2026. And I'll now turn the call over to Jill Peters, Senior Vice President, Investor Relations. Thank you, Jill. You may now begin. Jill Peters: Thank you, John. Good afternoon, everyone, and thank you for joining us today to review our results for the third quarter of fiscal 2026. On the call are Jeff Mezger, Executive Chairman; Rob McGibney, President and Chief Executive Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Treasurer. During this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results, and the company does not undertake any obligation to update them. Due to various factors, including those detailed in today's press release and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, an explanation and/or reconciliation of the non-GAAP measure of adjusted housing gross profit margin, as well as any other non-GAAP measure referenced during today's call, to its most directly comparable GAAP measure can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com. And finally, please note all figures are based on our quarter ended August 31 and all comparisons are on a year-over-year basis unless otherwise stated. And with that, here is Jeff Mezger. Jeffrey Mezger: Thank you, Jill. Good afternoon, everyone. The housing market remains challenging, with conditions having weakened since our last earnings call in June. Affordability is under further pressure due to rising mortgage rates. Inflation remains persistently high, driven in part by fuel prices, which prompted the Federal Reserve to raise interest rates last week. These factors, as well as geopolitical uncertainty and broader economic headwinds, have resulted in consumers becoming more cautious about buying a home. In addition, resale inventory, which is our largest competitor, has increased to its highest levels in a decade, and we're seeing pricing starting to decline in more of our markets, adding to the tension in this environment. Against this backdrop, our third quarter financial results reflected solid sequential improvement, meeting or exceeding our guidance. At a high level, our third quarter results included total revenues of $1.3 billion and diluted earnings per share of $1.05. We remain balanced in our capital allocation, investing nearly $725 million in land acquisition and development for future growth, while also returning capital to our shareholders. We repurchased about 890,000 shares of our common stock, or roughly 1.5% of our shares outstanding, at an average price below our current book value per share. We believe this is an excellent use of our cash, accretive to both our earnings and book value per share, and contributing to improving our return on equity over time. Inclusive of dividends, we returned over $65 million in capital to our shareholders in the third quarter. The impact of our share repurchase program over the past five years has been meaningful, as we have returned more than $2.1 billion in total capital to shareholders from repurchases, plus our quarterly dividend, and reduced our share count by more than one-third. During the third quarter, we expanded our book value per share to over $62. Our results in the third quarter support our expectations for full-year deliveries, housing revenues and margins to be within the ranges that we provided in June, despite moderation in our outlook for the fourth quarter, as we continue to navigate current market conditions. At this time, let me turn the call over to Rob for more details on the quarter's results and our outlook. Rob? Rob McGibney: Thank you, Jeff. A market like this one tests what a business model is built on. Our Built to Order model was designed to perform in exactly these conditions. And while we are not immune to the pressures in the operating environment, our approach did what it was supposed to do in the third quarter. It enabled us to sell before we build, know our costs before we commit capital to vertical construction, and keep our inventory risk low as demand softened. Our return to a predominantly Built to Order business is now firmly established. BTO homes represent nearly three quarters of our deliveries in the third quarter, which contributed to a sequential improvement in our housing gross profit margin. The sales alignment with our BTO strategy across our divisions has been strong, which positions our delivery mix in the quarters ahead to be solidly within our targeted and historical range. During the quarter, buyers continue to demonstrate both the desire for homeownership and the ability to qualify. However, declining consumer confidence and lower affordability in most of our markets weighed on traffic in our communities, which, while still solid, was down year-over-year. We saw more caution among prospective buyers, with many moving to the sidelines. As a result, while sales in June were resilient and slightly ahead of May, sales softened sequentially in July and August, resulting in a year-over-year decline in net orders. In this environment, the value of what we offer becomes even clearer. We build the home the buyer wants with the features, finishes, and ultimately a sales price that reflect the buyer's preferences for what they value and want to pay for. Those choices are key differentiators relative to an inventory home and also give our buyers a real tool to manage affordability, which is one reason our homes do not require heavy incentives to sell. We have remained disciplined in providing transparent pricing, adjusting price as needed to meet the market community by community while optimizing each asset for the best possible return. The same model that serves our buyers also protects our business, and it shows in our results. Our total unsold inventory is 26% of production, down from 41% a year ago, and finished unsold homes are just 9%, down from 16%. We also have roughly 1,100 homes sold but not yet started. That illustrates our BTO approach at work, building homes for buyers who have already committed, not for buyers we hope to find. Our direct costs on started homes in the third quarter were lower both sequentially and year-over-year. That result reflects our deep supplier relationships that helped limit cost increases in fuel surcharges, active rebidding of our local and national contracts, value engineering of our products, and a simplified studio offering that drives improved efficiency. While our overall average for direct costs was lower in the third quarter, we experienced some increasing cost pressure from fuel, general inflation, and tariffs as the quarter progressed. We believe this will result in slightly higher sequential direct costs for our fourth quarter deliveries. As to our sold but unstarted homes, with starts volume declining across the industry, this backlog gives us real leverage with our trade partners, which we are utilizing to offset as much of the cost pressures as we can. I want to take a moment on build times because they speak directly to one of the most common questions about Built to Order: how long a buyer has to wait? Our BTO homes averaged 99 days from start to completion in the third quarter, a slight improvement sequentially and 23 days or 19% faster than a year ago. At just over three months, our buyers are not waiting long for a home built the way they want it, and they can more cost-effectively lock in their interest rate than they could when build times were longer. Faster build times also increase our inventory turns and make us a more efficient company. We are working toward a target of 90 days, with improvement from here expected to be more gradual given how much progress we have already made. This is a real accomplishment, and I want to recognize our construction teams and trade partners who made it happen. The strength of our business also shows in the quality of our buyers. Our mortgage joint venture, KBHS Home Loans, remains an important part of how we serve our customers and run our business, and its metrics have been consistent and favorable over the past year. In the third quarter, our capture rate increased to 85%, up slightly from the second quarter. Higher capture rates help us manage our backlog more effectively and provide more certainty in closing dates, and we consistently see higher customer satisfaction among buyers who use our joint venture. The average cash down payment was steady at 16% or about $76,000. On average, KBHS customers had household income of about $134,000 and a FICO score of 742. Even with half of our customers purchasing their first home, we continued to attract buyers with strong credit profiles who can qualify for their mortgage and make a significant down payment or pay cash. About 8% of our third quarter deliveries went to all-cash buyers. As Jeff mentioned, we are maintaining our fiscal 2026 guidance for deliveries, housing revenue, and margins within the ranges we last provided. However, we are moderating our expectations for the fourth quarter with respect to ASP and gross margin. With over 80% of our fourth quarter deliveries already in backlog, we have solid visibility into the quarter. Starting with average sales price, the midpoint of our current guidance implies a fourth quarter ASP of approximately $480,000 compared to the roughly $500,000 implied by our prior guidance. On our last call, we said the West Coast and Northern California specifically would be a meaningful contributor to our fourth quarter ASP and gross margin. Northern California has held and continues to perform as expected, and its projected fourth quarter ASP has increased modestly since June. The change in our outlook is principally driven by Southern California for two primary reasons. First, slower sales in the third quarter relative to our expectations have reduced the number of higher-priced Southern California homes we expect to close in the fourth quarter, weighing on our overall ASP. Second, the mix of Southern California communities delivering in the quarter has shifted from what we anticipated in June. Together, these factors account for roughly the $20,000 reduction in our projected fourth quarter ASP. As to our fourth quarter gross margin, we now expect it to be about 1 percentage point lower than our prior guidance implied as a result of market pressures and higher direct and land costs. Bill will walk through the details of that updated outlook later in the call. We expect an ending community count in the fourth quarter of between 270 and 275 communities, roughly in line with the prior year. This projection includes approximately 115 new communities that we will have opened in fiscal 2026 by year end and a similar number of communities that will have sold out, representing a solid rotation of our assets. Our new community openings are an important part of sustaining a predominantly Built to Order delivery mix. As we have shared in the past, prior to opening the community, we develop a list of interested potential buyers, and the anticipation and excitement that build in the months leading up to a grand opening translate into strong initial demand. As a result, our new communities generally open at a higher absorption pace, generating a strong volume of starts aligned with sales from the outset. Last year, we added two large land positions in the Las Vegas Valley, one of the most land-constrained markets in the country. The first, Meriden, sits in a highly desirable part of Henderson and is positioned to carry forward the success of our Inspirada master plan, also in Henderson, which is nearing closeout. Meriden is now open across all five of its product lines. Sales have been solid, and we expect first deliveries late in our fourth quarter. The second, Sandstone, is an attractive location in North Las Vegas with price points that are affordable relative to much of the Las Vegas Metro. Sandstone opens in the fourth quarter with four distinct product lines, and early demand is strong. We have built an interest list of more than 300 potential buyers, which should support a healthy absorption pace from day one. Both communities complement our broad presence across the Las Vegas Valley, including our established positions in the Southwest and Summerlin submarkets. With one of our best teams in the company leading the way, we are confident Meriden and Sandstone will produce strong results for many years to come. While we work to finish fiscal 2026, the foundation for fiscal 2027 is also taking shape. We expect to begin the year with a higher backlog than we began fiscal 2026 and our faster build times to drive stronger results. Homes that took us over 4 months to build a year ago now take just over 3, which means we can convert the same backlog into deliveries more quickly and sell further into the year for same year delivery. That backlog is the heart of our Built to Order model, giving us visibility as we plan for the year. We will continue to match starts to our sales base, keep our unsold inventory low, and manage each community individually for the best return. We have the business model, a favorable lot position of over 61,000 owned or controlled lots, providing a solid pipeline to support future growth targets, the balance sheet to grow when this market allows it and the discipline not to chase volume while it doesn't. And with that, I will turn the call back over to Jeff for his closing remarks. Jeffrey Mezger: Thanks, Rob. I want to thank our entire KB Home team for their ongoing commitment to serving our home buyers and the discipline with which they have been executing our business model. Our strategic positioning remains a real strength. We have a broad geographic footprint and a balance sheet that supports growth. This provides the foundation for our long-tenured team with experience throughout varying housing market cycles to continue to navigate current conditions. And we remain poised for the opportunity we believe is ahead once conditions correct. Our full-year guidance remains largely intact, which we view as a positive in this market environment. We are rewarding our shareholders with a steady return of capital, and we plan to continue our share repurchase program with up to $50 million of repurchases planned for our fourth quarter. We are committed to delivering long-term shareholder value, and we look forward to updating you at the end of the year. And now I'll turn the call over to Bill Hollinger for the financial review. Bill. William Hollinger: Thank you, Jeff. Let me start by briefly addressing our outlook. As Jeff and Rob mentioned, market conditions have weakened since our last earnings call and remain challenging, with greater pressure on both demand and pricing than we had anticipated. As a result, we have adjusted our fourth quarter expectations to reflect the current environment. While our outlook for the quarter has moderated, our expectations for the full year remain largely unchanged, and I will provide you additional details throughout my remarks. As to the third quarter, despite the difficult operating environment, we delivered solid results that, while below the year-earlier period, met or exceeded our guidance range across all metrics. In the quarter, we generated housing revenues of $1.3 billion, net income of $65 million, and diluted earnings per share of $1.05. Our housing revenues for the quarter, which were at the midpoint of our guidance range, declined 20% from $1.6 billion for the prior period, primarily reflecting a 9% -- 19% decrease in the number of homes delivered and slightly lower overall average selling price. We delivered 2,732 homes during the quarter, representing a backlog conversion rate of 60% compared to 71% a year ago. The lower conversion rate reflected our focus on increasing the mix of Built to Order homes delivered. During the quarter, we achieved our goal of returning to a predominantly Built to Order business with these homes comprising a higher-than-expected 74% of homes delivered, up from the 60% in the second quarter. As a result, we also generated our first year-over-year increase in our backlog in four years, providing a foundation for future deliveries. Turning to our outlook for deliveries and revenues, we expect fourth quarter homes delivered to range from 3,000 to 3,500 and housing revenues to range from $1.45 billion to $1.65 billion. For the full year, we expect homes delivered of 10,500 to 11,000, consistent with the outlook we provided on our last call. We have narrowed our range of housing revenues to $4.9 billion to $5.1 billion, reflecting our current expectations for the average selling price. For the third quarter, the overall average selling price of homes delivered was $473,000 compared to approximately $476,000 for the prior quarter and modestly higher than the second quarter. Based on the current market conditions, the midpoint of our fourth quarter guidance implies a sequential increase in average selling price to about $480,000, as Rob mentioned. Homebuilding operating income for the third quarter was $67 million or 5.1 -- 5.2% of revenues compared to $131 million or 8.1% of revenues for the year earlier quarter. The year-over-year decrease primarily reflected a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues. Our third quarter housing gross profit margin was 16.5% compared to 18.2% for the year-earlier quarter, but was up sequentially from the second quarter, excluding inventory-related charges of $3 million and $11 million, respectively. Our adjusted housing gross profit margin was 16.8% compared to 18.9% a year ago, primarily reflecting pricing pressures, higher relative land costs, and reduced operating leverage. Our current quarter adjusted housing gross profit margin improved sequentially from 15.7% in the second quarter. This sequential improvement reflected a stronger-than-expected mix of Built to Order homes delivered, which also contributed to our margin coming in slightly above the high end of our guidance range. When we provided margin guidance on our last call, our outlook for the fourth quarter was more favorable than it is today. At that time, we expected a sequential improvement supported by positive operating leverage, stronger contribution from our expanding BTO mix, and additional upside from a favorable shift toward higher-priced, higher-margin West Coast deliveries. Since then, market conditions have evolved differently than we thought. We now anticipate housing gross margin to be down on a sequential basis in the fourth quarter. With that -- with the higher-than-expected BTO mix of homes delivered in the third quarter, we achieved our goal of returning to a predominantly Built to Order business earlier than we thought. As a result, we now expect less incremental margin benefit from BTO mix in the fourth quarter. In addition, we now anticipate a smaller contribution from our higher-margin West Coast communities than previously projected. While our Northern California business continues to perform as expected, our margins in Southern California have been impacted by a more competitive environment. And we have made pricing adjustments in response to market conditions and higher mortgage rates. More broadly, softer market conditions and greater affordability pressures have contributed to increased pricing pressures across many of our markets. And together with slightly higher costs, as stated earlier, we are creating an -- they are creating an additional headwind to margins. While these factors have affected our fourth quarter outlook, they are less impactful to our full-year projections. Accordingly, we have slightly lowered our full-year gross margin guidance compared to the outlook we provided on our last call. We now expect our housing gross profit to be in the range of 16% to 16.6% for the fourth quarter and 16% to 16.2% for the full year, both assuming no inventory charges. Our selling, general and administrative expense ratio for the third quarter was 11.3%, which was at the low end of our guidance range. Our SG&A ratio increased from the 10% for the year-earlier period, mainly due to lower operating leverage, partly offset by lower costs associated with certain performance-based employee compensation plans and a 6% year-over-year reduction of personnel. For the fourth quarter, we are forecasting an SG&A ratio to be in the range of 10.3% to 10.9%. For the full year, we maintain the midpoint of our prior guidance range while narrowing the range and now expect our SG&A ratio to be in the range of 11.5% to 11.7%. Included in both our fourth quarter and full-year guidance is an estimate of an accelerated equity-based compensation charge associated with certain annual equity award grants expected to be granted in the quarter. In the 2025 fourth quarter, this charge was $16 million. We generated total pre-tax income of $81 million for the third quarter compared to $143 million for the year earlier quarter. Our income tax expense was roughly $16 million, representing an effective tax rate of 19.6% compared to 23.3% for the prior period. The tax rate was within our guidance range and reflected benefits associated with stock-based compensation as all remaining outstanding options were exercised during the quarter. Looking ahead, we expect our effective tax rate to return to a more normalized level of approximately 26% for the fourth quarter. For the full year, we anticipate an effective tax rate of approximately 23%, which is in the midpoint of our previous guidance. As I previously mentioned, we generated net income of $65 million and diluted earnings per share of $1.05. This compares to net income of $110 million and diluted earnings per share of $1.61 for the same quarter last year. Our diluted share -- average share count for the current quarter was down 9% year-over-year, reflecting the impact of our share repurchase activity. Turning to our balance sheet, we maintained a disciplined and balanced approach to capital deployment during the quarter, continuing to invest in the business while returning capital to shareholders. With our investment in land and land development since the beginning of the year, our inventory has grown to $6 billion, up 5%, and we ended the quarter with over 61,000 lots owned and under contract while returning capital to our shareholders through share repurchases and dividends as mentioned. We ended the quarter with cash of $159 million. Total liquidity was $942 million, including $783 million available under our unsecured credit facility with $415 million drawn. As a result, our debt-to-capital ratio was 35.7% at the end of the quarter compared to 33.2% a year ago. Despite this modest increase, we believe we have a healthy financial position, supported by substantial liquidity and a well-laddered debt maturity profile. We believe the investments we have made in our land pipeline and community portfolio positions us well for the future while providing the capacity to adapt to evolving market conditions. We will continue to evaluate land investments, share repurchases, and financing activities through the lens of liquidity, cash flow generation, market conditions, and long-term strategic objectives. While our outlook reflects a softer demand environment primarily from continued affordability pressures, our higher backlog provides visibility into our expected fourth quarter performance. With our success in reestablishing a predominantly Built to Order business, our focus on operational execution and the strength of our balance sheet, we believe we are well positioned to manage through the present environment. As we look ahead, we remain focused on executing our strategy, capitalizing on growth opportunities, maintaining disciplined capital allocation, and driving long-term value for our shareholders while returning -- remaining responsive to evolving market conditions. We will now take your questions. John, please open up the line. Operator: Thank you. We will now conduct a question and answer session. [Operator Instructions] The first question comes from the line of Matthew Bouley with Barclays. Matthew Bouley: I want to start out on the gross margin outlook. And so, kind of, helpful color there you gave at the top around what the change around your expectations for Q4, sort of, combination of changing market conditions. And on the other hand, some things have stayed the same, such as your Northern California mix. So the big picture question is, is given the state of market conditions today, is that fourth quarter, kind of, representative of what your mix should look like? Mix defined as Built to Order, defined as Northern California, Southern California, et cetera. Obviously what I'm trying to get at is, kind of, what the first half of '27 should look like. And if there's any, sort of, additional changes in the mix, we should consider beyond Q4. Rob McGibney: A lot embedded in that question. I'd just start with as we look at our Q4 projections across the board and our guidance, that's all based on how we see it playing out based on current market conditions. As far as the mix goes, the Northern California piece that we described on our call last quarter came through basically in line how we expected. We talked about Southern California being down, and one of the drivers of the ASP coming down, that is not something that we expect to continue. We were not pleased with the results that we've got. We're taking steps there to get those sales back and bring those deliveries back online as we look ahead. So we expect that mix to rotate back in. As we look at Southern California specifically, one of the things that we didn't mention in the prepared remarks was just some missed community openings that are relatively high ASP communities. So those will open, those will come through. As we look out, we're not giving guidance on '27. Obviously, market conditions are pretty volatile and choppy right now, but we're pleased with our shift back to Built to Order. We know that's going to continue. We're going to continue aligning starts with sales, and we'll update you on our outlook for '27 as we get closer to it. Matthew Bouley: Okay, got it. Well, thank you for those details. Secondly, I wanted to touch on the direct cost side between both materials and labor. I think I heard you mention that there's been some changes specifically on how you're thinking about the materials inflation into Q4, but I didn't hear you mention much about labor. Obviously, this is in context of your peer last week speaking about some challenges with, call it, immigration and maybe demand for labor from data centers and so forth. And so how is that playing out across your communities nationwide? And how are you thinking about the impact to your own labor costs, either in Q4 and beyond? Rob McGibney: Yes, really with the pressure that we're referencing is mostly on the material side. You've got fuel prices that have gone up. That's embedded in a lot of the products, but it's also a direct cost that our trade partners are living with and experience in every day. So, we expect to see that creep into some of our costs on directs and land development as well as we move throughout. And we've also set those up as direct fuel surcharges. So when and if fuel prices pull back, we can immediately extract those out. As to labor, I would say what we're seeing across most markets is the starts are down. We really haven't had a lot of issues getting labor to our job sites. We are hearing stories just anecdotally about some of the labor challenges that are out there, but direct experience that's not been a big part of what we're seeing on the cost side of things. Operator: The next question comes from the line of Stephen Kim with Evercore ISI. Randa Shaw: This is Randa on for Stephen. Thanks for taking my question. First, now that KB has achieved its goal of returning to a predominantly Built to Order business model, I wanted to ask if you have an update on your long term gross margin targets. I believe that you previously stated 22% gross margin. Rob McGibney: Yes, certainly. I mean, that is still our target. Market conditions have been not exactly conducive to lifting margins lately, but as we're underwriting deals, we're sticking to our discipline there. Frankly, it's one of the reasons that we've walked from many of the deals that we've had under contract because they just -- land deals that is, because they just no longer met our returns. So as we look out into the future, that is still in play and still a target for us. Randa Shaw: Got it. And then your land spend and the quarter rose pretty significantly, both on a year-over-year basis and a sequential one. Curious what drove the substantial investment in land this quarter, and then how should we think about that going forward? Rob McGibney: Yes, so when you're looking at that land spend, it's comprised of really 3 things. It's the actual land, the raw land that you're purchasing, it's the development and then it's the fees. So most of, if not all, of the increase that you're seeing is related to development and fees that we're paying for land that was previously purchased that's working through the system. Operator: And the next question comes from the line of John Lovallo with UBS. John Lovallo: The first one is on the cost side. I mean, if you're still seeing costs on homes that were started in the third quarter down versus the homes that were started in the second quarter, I would expect costs to be down quarter-over-quarter in the fourth quarter, maybe even into the first quarter. Just help me understand why that thinking is wrong and what would be offsetting it. Rob McGibney: Yes, John, part of it is just the speed at which we're building now. Before we would have more visibility if we started and it's taking us 6 months to build, you can see that coming. Right now, as fast as we're building as that -- those costs come and you get more pressure throughout the quarter like we've seen here, even though our average for homes started was down on a sequential and year-over-year basis, it did increase throughout. So homes that were starting later in the third quarter that will deliver in Q4, they're going to have that extra embedded cost pressure in them. So that's why we're projecting that or thinking that's coming. John Lovallo: Okay, understood. And then, Jeff, at the top and in the press release, you guys talked about some deterioration in the market since the last quarter. That's pretty similar to what your competitor said last week. Although, you know, I've noted that our channel checks with big builders and other companies across the complex had suggested at least some early signs of stabilization. So I guess the question I have for you is that would you agree that the housing market is at least getting closer to a bottom here and that any reduction in oil prices or rates could be a pretty powerful catalyst on the upside? Jeffrey Mezger: Yes, John, I think if you get a little jolt of consumer confidence, you'll see a lift in housing demand. The people are out there. Our traffic is down, but it is down order of magnitude of about 10%. So there's a lot of people out still looking for homes. They're just cautious. And there's a lot of things going on right now that they're trying to digest. But if they feel better about where things are headed, I think you'll see a demand come right back. So we're -- you have to deal with today and you keep an eye on it. And I think they will come back. Even since the end of our quarter in August, rates have ticked up 20, 30 bps. And every time you get a little movement like that, it takes time for the consumer to digest it. They don't want to feel like they overpaid for a house because they bought at the peak of the rates and our rates coming back down at 20% or 30%. So they wait to see if rates are coming back down and they just -- they digest the rate move. So, rates ticked up a little bit, that puts them on pause again. And you got to wait for it all to get digested. But the demographics are there and the people are out there and there's still demand. It's just getting everybody comfortable with it on you move. Operator: Our next question comes from the line of Susan Maklari with Goldman Sachs. Susan Maklari: My first question is on the ability to value engineer the homes, which you talked about in your prepared remarks. Can you talk a little more of what are the changes that you're making, how we should think about that coming through in future quarters and maybe the offsets there as we think about value engineering relative to the BTO model that you've now really gotten into. Rob McGibney: So -- when I think about the value engineering process and just getting more efficient building envelope that we're working with or getting more efficient with our studio offerings. It's never an event that we say that we're done with at some point. It's an ongoing process. And I feel like we've made a lot of great progress as a company over the last few years, especially starting with when the supply chain crunch hit. And some of that was just, we had to get more efficient quickly and reduce our SKUs in order to be able to get material and build the houses on a reasonable timeline. One of the big things that we're focused on today is standardization. So, when we're looking at our floor plans, there are opportunities still out there today to simplify, whether it's offsets or overhangs. If you're thinking about the outside of the building and pulling those back, as long as we can get those types of things approved through the municipality, the consumer still accepts it, the house still looks good. There's really no value taken away from the customer, but it does result in meaningfully lower cost. And as I said, it's always -- it's an ongoing focus. I think we've been through a lot of the low hanging fruit that was out there, if there was any. And now we're focused on things more related to the actual building themselves and how do you squeeze out another few cents or dollars per square foot in the actual homes that we're building. So ongoing process with our architecture team as we seek more efficiency. Susan Maklari: Okay, all right, that's helpful. And then one of the other things that you mentioned is the ability to actually build an interest list as you are starting to open new communities, which is in contrast to what we're hearing in terms of consumer confidence and overall conditions. Can you talk about what you're doing in order to build that interest list? Has something changed? Is there a difference in the type of buyer that's coming out there? And just anything notable within that and how you're approaching it? Rob McGibney: Yes, it's a discipline that we've had in the company for a long time, something that we're consistently training on. But the main thing is that we start early. We've got a good runway of time leading up to a community opening. And it's very local, and we'll start within that market. And -- it might be signage in the beginning and then we're reaching out through a digital interest list of people to either call in or they'll scan a QR code on that sign, and it just starts building slow. But if you imagine a new community that's coming to a parcel and we put our sign up and you start to get a little interest and you capture those people and you take them through the process and it tends to grow. One of the next steps would be grassroots marketing that our teams are doing with local businesses and realtors there, and you get a little more interest from that. And then we hear the land development going. People see that, that project is starting to become real and it grows a little from that. And then once you go vertical with the model construction, even more comes. And then you ultimately get to the point where you've got an open model. You try to bring all of that pent-up demand or interest that we've got in and then you start the qualification process to see how many people on that interest list are real buyers that can qualify. And the goal for us is once we open that community for sale, we're getting about 2 months of our expected run rate of sales in the first week to 10 days from when we grand open that community. And then keep it running on whatever our projected sales pace is for that community on an ongoing basis. So it's really -- you start small, you start grassroots, it builds up as you go, but by the time that you get to that grand opening event, you've got this pool of ready, able, and willing qualified buyers ready to go. Operator: Our next question comes from the line of Alan Ratner with Zelman & Associates. Alan Ratner: You guys have made the pivot towards more of a base price model, I guess, as opposed to, kind of, the incentive burden that some of your peers have seen. And I'm curious now with Built to Order and your backlog of pre-sold. When rates move as much as they have in a relatively short period of time, are you forced to, kind of, throw some incentives at the closing table at buyers in order to get them to either pull the trigger and move forward or even qualify in some cases? Because I'm imagining they probably thought they were going to come in with a lower rate, when they originally signed the contract. Rob McGibney: Yes, Alan, it happens. The first thing that we do is try to lock the buyers early on in the process as we can. And I mentioned in the -- my earlier prepared remarks that's a little more challenging to do when your build times are longer. But when we're at roughly 90 days now, it's more visibility and it's easier, it's less expensive to lock that loan up front. So that's the first approach that we take is try to get everybody locked as early as possible. Sometimes buyers aren't on board for that. They want to play the market and hope that rates come down. And we have seen in backlog some situations where we've had to make some minor adjustments, either just to keep them in the deal or to get them qualified, but it's minimal overall, especially when we can get them locked early and up front. Their loans locked, that is. Alan Ratner: Got it. That's very helpful. Second question just on, kind of, the balance sheet and capital allocation. You guys are going to spend north of $300 million this year on buybacks and dividends. I know you don't give cash flow guidance, but you're trending well below that from a free cash standpoint for the full year. Just kind of curious now with leverage back at roughly 30 percent. I mean, how much longer can you continue to return more capital to shareholders and cash you're bringing in the door on a free cash basis. I guess, what I'm asking is how high are you willing to bring that leverage ratio assuming cash flow doesn't materially increase from here. Jeffrey Mezger: Well, Alan, as we've demonstrated over the years, it's a disciplined balance and you know the inputs. How much are we going to spend on land? What's our appetite to grow? What's the timing of development? What's the timing on WIP and cash coming in and what's our revenue and profit, everything that we factor into it. And if you look at how our business has rotated over the last 3 years, our inventory has actually grown a few hundred million while our build times have come down significantly. So we took the cash from the build times coming down, and we put some of it to repurchases, and we put a lot of it to acquisition and development and our acquisition and development has been going up the last few years. As we look ahead, we'll continue to balance all those. And I think in the current environment where -- the land market has been a little chunky where we have a couple of big deals we've done and we'll phase out the dev and get that back in balance. You'll probably see our land spend come down a little. And depending on how the WIP is, that will influence how much our repurchases will be. And it'll all stay programmatic and opportunistic at the same time, depending on the dynamics at that point in time, but our balance sheet remains solid and we'll stay focused on growing the company. Operator: And the next question comes from the line of Rafe Jadrosich with Bank of America. Rafe Jadrosich: You gave some helpful color on sort of fiscal '27 with your backlog up and better build cycles. On the community count, you're flattish this year. As you look at your current pipeline, can you give us some help on what we should expect for next year? Do you expect to return to growth on community count? Rob McGibney: Well, we're not giving guidance. I mean, it's a roundabout way of asking for community count guidance, and I appreciate the effort. But it's really still early, right? We're focused on finishing 2026 strong. We'll come back to you on 2027. But overall, with 61,000 lots owned and controlled, we feel like we've got plenty of runway to provide growth if the market conditions allow it. And that's where we are today. Rafe Jadrosich: Okay. Fair enough. And then just on the fourth quarter gross margin outlook, it was a little bit below your prior expectations, but fiscal 3Q was better. Can you just talk about what drove upside to the fiscal third quarter versus your expectations given the fact that the macro was worse? And if you could just bridge us from 3Q to 4Q, like what's the different puts and takes on gross margin? William Hollinger: Okay, let me just jump in there. The bridge, let's say, from the Q3 to Q4, as we said, it's going to be down. And where we ended up with Q3 at 16.8%, we're now anticipating 16.3%. It's primarily, I would say, based on that we're going to do as we expected last time. There will be some improvement that is going to be positive from leverage in the fourth quarter compared to the third quarter. But these are going to be more than offset that leverage. So if we're up leverage about, let's say, 50 basis points, we think we're going to then lose basically 1 point. And that point is going to come from pricing pressures, higher costs as well as product and geographic mix, as we said, specifically like in our Southern California area. So I think that there's an up and down and some noise in there, but net-net, it's just 0.5 point. Operator: And the next question comes from the line of Buck Horne with Raymond James. Buck Horne: Kind of want to follow up on the tail end of that and just, kind of, drill into the lot cost inflation as we're, kind of, working through the bridge into the fourth quarter. You guys mentioned that lot costs were one of the factors going into the fourth quarter. What are lot costs trending? What were they up year over year in the third quarter? And then how is that trending into the fourth quarter? Rob McGibney: So I go back to something I said earlier on the lot cost just to get everybody grounded in it. The fees is one of the bigger -- it's a big cost that's embedded between -- you got the 3 things; you've got the fees, you've the land development and then you've got the land. And we've seen pretty significant fee increases over last year, even longer than that, in many of our markets. So on the -- I'll go year over year on the lot cost. If we just look at the arithmetic alone, it would appear to be up pretty meaningfully on a year over year basis. But especially with our business and the weighting of California, a lot of that is mixed. It's not really just pure land inflation. When I look at how that gets made up, the big portion of the year-over-year decline in revenues was really concentrated in some of our lower lot cost markets, like our Texas divisions where lot costs are much lower generally than certainly California or the West, but most parts of the country. But if I look at that and you hold last year's delivery mix constant to remove that component, the increase on a year-over-year basis that we're looking at is really in the low single digits. So it's not a massive move. And as I said in the beginning, a lot of that's driven by fees. Buck Horne: Okay, that's helpful color. Appreciate the extra context on that. And you guys also mentioned that you are seeing some additional pricing pressure from the resale market. I think that was cited last week as well. So there's, I guess, some sellers out there starting to rationalize with these higher rates as well. I'm just wondering if there's any specific markets or your markets in particular where you're seeing that additional resale inventory become more competitive or having a more outsized impact? Rob McGibney: It really -- I've said this, it's probably not a satisfying answer, but it's really submarket by submarket within all of these different regions. You hear a lot about Texas and the resale markets there. I think in Texas, the resale markets have generally been more of a pace story than a price story. But we are starting to see, I would say, the sellers capitulate a little bit more. And either prices come down or concessions going up. I think ultimately, it's good that we're starting to see that become more in balance and work through the resale that's out there. I think in a lot of cases for the last couple of years, there have been a lot of listings on the market, depending on what part of the country you're in, but they're listed at really high prices, probably not realistic. I would call them the make me move type of price. And I think we're starting to see maybe the sellers, the resale homeowners get a little less patient with that and starting to adjust. So, overall, I would agree resale levels have generally come up. It's becoming more of a formidable competitor than it's been over the last several years, but it really is a market by market story. Florida is another one where we've got resale inventory. It's still elevated in a lot of markets, even though it's improved in places like Jacksonville. So you really have to look at the details and within a reasonable radius of each community that we have and what that resale competitive pool looks like. And we certainly have to stay tethered to that with our pricing because it has been and likely always will be one of the biggest competitors that we have out there for our product. Operator: And the next question comes from the line of Trevor Allinson with Wolfe Research. Trevor Allinson: You talked about the benefit from your higher-margin Bay Area communities coming through as you guys were expecting. Can you talk about the pipeline there? What portion of your business are these high-margin communities? And then how long should we expect an outsized contribution from those communities? Rob McGibney: Well, I would say it's just really getting back to what we once were in Northern California. For a long time, it was one of our biggest revenue drivers and biggest profit drivers. And we talked about on our last call how we, kind of, lost some of that business, and we've been building it back. I think we've still got a few more quarters in front of us of ramping up because we're still bringing communities online at good margins and high ASPs. At some point, a few quarters out, I think we'll find a new equilibrium where the newness effect of that has, kind of, been assimilated into the business. But always looking at that as along with all of our businesses an opportunity to grow. But I think we've got a few more quarters for that to really get in balance as we open up some of the new stores that we have in the Northern California. Trevor Allinson: And the second is on absorption pace. It looks like this year is going to land anywhere between 3.3 and 3.4 per month for the full year. Obviously, the slowest you've been for a while is a product of a softer environment. With mortgage rates moving higher here, how should we think about your willingness to let that absorption pace continue to drift lower from where it's running at this year to protect gross margin? And kind of associated with that question, is there a pace that you all view as a floor for you guys on absorption? Rob McGibney: We established -- it's really, again, community by community. So we establish a minimum run rate that we need to hit for each community, and that changes over time depending on what season we're in or the number of lots that we have remaining or the ease of replacing those lots. And it also does include community level margins and a long list of other factors. But over time, we want to target around 4 sales per month per community when you annualize it out, and we're trending below that this year. And would -- we have -- certainly have designs on getting back to that. With market conditions as choppy as they are, we're not looking to force that and at the great expense of margin. So I don't have an overall company-wide target that I would set other than, over time, we want to hit that 4 per month per community. But in the meantime, with choppy market conditions, we're going to manage it asset by asset, community by community and just gear them towards getting the best return profile for each individual community that we can. Operator: And our final question comes from the line of Sam Reid with Wells Fargo. Richard Reid: Actually wanted to follow up on the last question around Northern California. So it sounds like you've still got some more communities you're looking to bring online there. Is that a backdoor way of saying that we could potentially see a mix benefit into 2027 simply from more Northern California communities hitting the market. Rob McGibney: Yes, I would expect that we will. I'd say we're 3 quarters to a year out before we get to, kind of, what I would say is our equilibrium there. So as we ramp up and we get more sales and deliveries out of that region, I think we will continue to see some mix benefit coming from that. Richard Reid: That's helpful. And then switching gears here a little bit. I believe you said earlier in the call, something in the order of 80% of your closings more or less are kind of booked for the fourth quarter. Could you just give us some context on what you're assuming for your backlog margin versus what you're embedding for your home sold and closed intra quarter for Q4? Rob McGibney: Backlog. So if I'm understanding the question right, are you asking -- I think the spread between what we've got on our Built to Order sales versus our inventory sales, which has stayed pretty consistent over the last couple of years. It's right around 4%. There's a range usually between 3% and 5%, but when we distill that down, we typically see about 4 points better margin on Built to Order sales than we do on inventory, whether we're closing that -- selling that and closing it within the quarter or you sell it even earlier than that. Richard Reid: Is factored in the guidance? Rob McGibney: Yes, right. Yes, that combination, those 2 put together as we've laid out our quarter is all factored into our guidance. Operator: Thank you, and ladies and gentlemen, that concludes today's teleconference. We thank you for your participation. You may now disconnect your lines. Before you buy stock in KB Home, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and KB Home wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $389,154!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,406,303!* Now, it’s worth noting Stock Advisor’s total average return is 949% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of September 23, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends KB Home and recommends the following options: short October 2026 $60 calls on KB Home. The Motley Fool has a disclosure policy. KB Home (KBH) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Management successfully returned the business to a predominantly Built-to-Order (BTO) model, with BTO homes representing 74% of third-quarter deliveries. - The BTO strategy is serving as a risk mitigation tool, allowing the company to lock in costs before vertical construction and minimize unsold inventory exposure as demand softens. - Performance was impacted by declining consumer confidence and lower affordability, driven by persistent inflation and rising mortgage rates that have pushed many buyers to the sidelines. - Resale inventory has reached its highest level in a decade, creating increased pricing pressure and competition across several key submarkets. - Operational efficiency improved significantly, with build times reduced by 23 days year-over-year to an average of 99 days, enhancing inventory turns and capital efficiency. - The company maintained a disciplined pricing approach, utilizing transparent pricing and buyer choice in the BTO model to manage affordability rather than relying on heavy incentives. - Direct costs on started homes were lower year-over-year due to active rebidding of contracts and value engineering, though fuel and tariff pressures emerged late in the quarter. - Fourth-quarter average selling price (ASP) expectations were moderated to approximately $480,000, down from $500,000, due to slower sales and community mix shifts in Southern California. - Gross margin guidance for the fourth quarter was lowered by approximately 1 percentage point to 16.0%–16.6%, reflecting pricing pressures and higher direct and land costs. - Management is targeting a further reduction in build times toward a 90-day goal, which is expected to allow for faster backlog conversion and more same-year delivery sales. - The company expects to enter fiscal 2027 with a higher backlog than the prior year, providing visibility despite volatile market conditions. - Capital allocation will remain balanced, with plans for up to $50 million in share repurchases in the fourth quarter while maintaining a pipeline of over 61,000 lots. - Southern California underperformed expectations due to missed community openings of higher-priced homes and a more competitive pricing environment. - Inventory-related charges of $3 million were recorded in the third quarter, compared to $11 million in the second quarter. - Rising fuel prices, general inflation, and tariffs are expected to result in slightly higher sequential direct costs for fourth-quarter deliveries. - The company's debt-to-capital ratio increased to 35.7% from 33.2% a year ago, though liquidity remains substantial at $942 million. - Management expects the Northern California mix benefit to continue for several quarters as more high-ASP communities open and reach equilibrium. - The Southern California ASP decline is viewed as temporary, with plans to recover sales and bring delayed high-priced communities online. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Cost pressures are primarily material-based, specifically fuel surcharges which are structured to be extracted if prices pull back. - Management has not experienced significant labor shortages or cost spikes, noting that industry-wide starts are down, which provides leverage with trade partners. - The company maintains its long-term 22% gross margin target despite current market volatility. - Management has demonstrated discipline by walking away from land deals that no longer meet return requirements in the current environment. - Faster build times allow buyers to lock in mortgage rates more cost-effectively, reducing the risk of cancellations. - While some minor adjustments are made at closing to keep buyers qualified, the impact has been minimal due to early rate locking. - Resale inventory is becoming a more formidable competitor as sellers begin to rationalize prices or offer concessions. - Management stays 'tethered' to resale pricing on a submarket-by-submarket basis to ensure new home competitiveness.

Interested in KB Home? Here are five stocks we like better. KB Home met or exceeded its Q3 fiscal 2026 guidance, reporting $1.3 billion in housing revenue, $65 million in net income and $1.05 in diluted EPS. Revenue fell 20% year over year as deliveries declined 19% to 2,732 homes. The company’s built-to-order model supported sequential margin improvement and lower inventory risk: built-to-order deliveries rose to 74%, while adjusted housing gross margin increased to 16.8% from 15.7% in Q2. However, margins remained below the prior year amid pricing, cost and mix pressures. KB Home moderated its Q4 outlook, lowering expected average selling price and gross margin because of weaker Southern California sales, higher costs and an unfavorable delivery mix. The company maintained its full-year delivery outlook and continued investing in land while returning more than $65 million to shareholders through buybacks and dividends. Why KB Home Could Reward Patient Investors Later KB Home (NYSE:KBH) reported third-quarter fiscal 2026 results that met or exceeded its guidance despite what executives described as a more difficult housing environment marked by rising mortgage rates, affordability pressures, higher resale inventory and cautious consumers. The homebuilder generated $1.3 billion in housing revenues, net income of $65 million and diluted earnings per share of $1.05 for the quarter ended Aug. 31. Housing revenues declined 20% from the prior-year quarter, primarily because deliveries fell 19% to 2,732 homes. The company’s average selling price was $473,000, compared with approximately $476,000 in the prior-year period. → These 3 AI Stocks Sold Off Hard—Even as Their Outlooks Improved KB Home's Earnings Slump Puts Dividends and Buybacks at Risk Executive Chairman Jeff Mezger said the market had weakened since KB Home’s June earnings call, citing persistent inflation, higher fuel prices, the Federal Reserve’s recent rate increase, geopolitical uncertainty and increasing resale-home competition. He said resale inventory had reached its highest level in a decade and prices were beginning to decline in more markets. President and Chief Executive Officer Rob McGibney said KB Home’s built-to-order model helped the company manage demand softness by allowing it to sell homes before beginning vertical construction. Built-to-order homes represented 74% of third-quarter deliveries, up from 60% in the second quarter and above the company’s target for returning to a predominantly built-to-order business. → Insiders Signal Deep Value In DICK’s Sporting Goods Homebuilding Headwinds Putting These 3 Stocks Under Pressure The higher built-to-order mix contributed to sequential gross-margin improvement. Housing gross profit margin was 16.5%, compared with 18.2% a year earlier. Excluding inventory-related charges, adjusted housing gross profit margin was 16.8%, up from 15.7% in the second quarter but down from 18.9% in the prior-year quarter. McGibney said the company’s unsold inventory was 26% of production, down from 41% a year earlier, while finished unsold homes were 9% of production, compared with 16% a year ago. KB Home also had roughly 1,100 homes sold but not yet started at quarter-end. → Coach’s Momentum Powers Tapestry Despite the Stock’s Sharp Pullback The company’s build-to-order homes averaged 99 days from start to completion, an improvement of 23 days, or 19%, from the prior year. KB Home is working toward a 90-day construction-cycle target, McGibney said. KBHS Home Loans, the company’s mortgage joint venture, captured 85% of third-quarter buyers. The average customer had a 16% cash down payment, or about $76,000, household income of approximately $134,000 and an average FICO score of 742. About 8% of third-quarter deliveries were purchased with cash. While KB Home maintained its full-year delivery, housing-revenue and margin outlooks largely within its previous ranges, executives lowered their expectations for fourth-quarter average selling price and gross margin. The company expects fourth-quarter deliveries of 3,000 to 3,500 homes and housing revenues of $1.45 billion to $1.65 billion. Its full-year delivery outlook remains 10,500 to 11,000 homes, while full-year housing revenue guidance was narrowed to $4.9 billion to $5.1 billion. The midpoint of the fourth-quarter revenue outlook implies an average selling price of approximately $480,000, down from roughly $500,000 implied by the company’s previous guidance. McGibney said the revision was principally related to Southern California, where slower third-quarter sales reduced the number of higher-priced homes expected to close in the fourth quarter and where the delivery mix shifted from prior expectations. Northern California continued to perform as anticipated, according to management, and its projected fourth-quarter average selling price increased modestly since June. McGibney told analysts the company expects Northern California’s contribution to continue building for several more quarters as additional communities open. KB Home now expects fourth-quarter housing gross profit margin of 16% to 16.6%, excluding inventory charges, and full-year margin of 16% to 16.2%. Senior Vice President and Chief Accounting Officer Bill Hollinger said the fourth-quarter margin outlook reflects pricing pressure, somewhat higher direct and land costs, and product and geographic mix, including a smaller-than-anticipated contribution from higher-margin West Coast communities. Management said direct costs for homes started during the third quarter were lower both sequentially and year over year, but costs increased later in the quarter because of fuel, inflation and tariffs. Those later cost increases are expected to affect fourth-quarter deliveries. McGibney said labor availability had generally not been a major issue because housing starts have declined across most markets. KB Home invested nearly $725 million in land acquisition and development during the quarter while also returning more than $65 million to shareholders through repurchases and dividends. The company repurchased about 890,000 shares, or roughly 1.5% of shares outstanding, at an average price below book value per share. Mezger said KB Home’s book value per share exceeded $62 at quarter-end. Over the past five years, the company has returned more than $2.1 billion to shareholders through repurchases and dividends and reduced its share count by more than one-third, he said. The company plans up to $50 million in additional repurchases during the fourth quarter. Inventory increased 5% from the beginning of the fiscal year to $6 billion, and KB Home ended the quarter with more than 61,000 owned or controlled lots. Cash totaled $159 million, while total liquidity was $942 million, including $783 million available under its unsecured credit facility. Its debt-to-capital ratio was 35.7%, compared with 33.2% a year earlier. KB Home expects to finish fiscal 2026 with 270 to 275 communities, including about 115 new openings during the year and a similar number of sellouts. Management highlighted new Las Vegas Valley communities, including Meriden in Henderson and Sandstone in North Las Vegas, where the company had built an interest list of more than 300 prospective buyers before opening. Looking toward fiscal 2027, McGibney said KB Home expects to begin with a higher backlog than it had entering fiscal 2026. However, management did not provide formal 2027 guidance, citing volatile market conditions and its focus on completing the current year. KB Home (NYSE: KBH) is a homebuilding company that designs, constructs and sells residential properties in the United States. Its offerings primarily include single-family homes, with communities and floor plans intended for first-time buyers, move-up buyers and other owner-occupants. The company also provides homebuyers with opportunities to personalize selected features and finishes through its build-to-order approach. The company operates in several major housing markets across the United States, including locations in Arizona, California, Colorado, Florida, Idaho, Nevada, North Carolina, South Carolina, Texas and Washington. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "KB Home Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for September 2026.

KB Home (KBH) reported $1.3 billion in revenue for the quarter ended August 2026, representing a year-over-year decline of 20%. EPS of $1.05 for the same period compares to $1.61 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $1.29 billion, representing a surprise of +0.42%. The company delivered an EPS surprise of +19.32%, with the consensus EPS estimate being $0.88. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how KB Home performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Ending community count: 277 versus 273 estimated by three analysts on average. Backlog - Homes - Total: 4,398 compared to the 4,604 average estimate based on three analysts. Homes delivered - Total: 2,732 versus the three-analyst average estimate of 2,723. Net orders - Total: 2,604 compared to the 2,800 average estimate based on three analysts. Average selling price: $473 million versus the two-analyst average estimate of $469.85 million. Backlog - Value - Total: $2.05 billion versus $2.14 billion estimated by two analysts on average. Average community count: 279 versus 276 estimated by two analysts on average. Total Revenues- Homebuilding- Housing: $1.29 billion compared to the $1.28 billion average estimate based on four analysts. The reported number represents a change of -19.9% year over year. Total Revenues- Financial services: $4.75 million versus the four-analyst average estimate of $5.67 million. The reported number represents a year-over-year change of -21%. Total Revenues- Homebuilding: $1.29 billion versus the four-analyst average estimate of $1.28 billion. The reported number represents a year-over-year change of -20%. Homebuilding pretax income: $73.8 million compared to the $60.51 million average estimate based on three analysts. Financial services pretax income: $7.38 million versus the three-analyst average estimate of $7.18 million. View all Key Company Metrics for KB Home here>>> Shares of KB Home have returned -14% over the past month versus the Zacks S&P 500 composite's +1.3% change. The stock currently has a Zacks Rank #5 (Strong Sell), indicating that it could underperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KB Home (KBH) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research