Analysts Slash KB Home Targets Amid Margin Pressure and Revenue Decline

KBH reported fiscal third-quarter EPS of $1.05 on September 22, well ahead of the $0.88 consensus, but revenue of $1.30 billion only matched estimates and was down 20% from a year earlier . Deliveries declined 19% to 2,732 homes, net orders fell 12%, and net income dropped to $65.3 million from $109.8 million.

The margin outlook, not the headline beat, drove the reaction. KB Home lowered its full-year housing gross margin guidance to a range of 16% to 16.2%, from 16.1% to 16.5%. Its fourth-quarter housing gross margin forecast of 16% to 16.6% came in below the roughly 17.2% analysts had expected. Shares rose 1.53% in the regular session to $48.59, then slipped 2.23% after hours to $47.51 and fell 2.96% in premarket trading the next morning.

Brokerages cut targets across the board while mostly keeping their ratings. Barclays lowered its target to $49 from $57 and kept an overweight rating . Truist cut to $50 from $55 with a hold , RBC Capital trimmed to $50 from $53 at sector perform, Bank of America moved to $54 from $56 at neutral , and Citizens JMP reduced its target to $70 from $77 while keeping a market outperform rating . Not everyone is negative: one Yahoo Finance analysis argued the shares could be 17% undervalued after the guidance.

What to watch: whether mortgage rates and incentives let KB Home stabilize margins in the fourth quarter, the trend in net orders, and whether further target cuts follow.