KB Home (KBH) delivered better-than-expected earnings for the fiscal second quarter of 2025, offering a glimmer of strength in an otherwise tepid U.S. housing market.
Revenue came in at $1.53 billion—down more than 10% from a year earlier but slightly ahead of analyst expectations. Net income fell to $108 million, or $1.50 per share, from $2.15 per share last year. Despite these declines, the company beat Wall Street forecasts thanks in part to a $200 million share buyback effort.
Yet the market response was lukewarm. Shares slipped in after-hours trading as the homebuilder slashed its full-year revenue guidance for the second time in a row, now projecting between $6.3 billion and $6.5 billion, compared to the $6.6 billion to $7 billion forecast just three months ago.
CEO Jeffrey Mezger acknowledged that the spring selling season fell short of expectations. "Consumers are continuing to demonstrate a lack of confidence about the short term," he said, citing elevated mortgage rates and economic uncertainty as persistent headwinds.
Pricing Pressure and Slower Demand Weigh on Margins
KB Home’s average selling price ticked up modestly to about $489,000, but that hasn’t been enough to offset the drag from slowing demand. Home deliveries were down 11% to 3,120 units, and net orders dropped 13%, a telling sign of the housing market’s broader struggles. With mortgage rates hovering around 7%, affordability continues to erode, prompting KB Home to lean on incentives like mortgage rate buydowns and base price adjustments—tactics that are squeezing margins across the sector.
The company’s housing gross profit margin dropped to 19.7% from 21.2% a year ago. Executives now expect that figure to slide further, guiding for a margin of 19.0% to 19.4% for the full fiscal year. Backlog metrics were also concerning: the number of homes in backlog fell 24% to 4,776, while the total value of that pipeline dropped to $2.3 billion—a 27% decline.
Municipal delays in community approvals further impacted spring sales, missing opportunities to close several hundred deals, according to management.
KB Home’s average selling price ticked up modestly to about $489,000, but that hasn’t been enough to offset the drag from slowing demand. Home deliveries were down 11% to 3,120 units, and net orders dropped 13%, a telling sign of the housing market’s broader struggles. With mortgage rates hovering around 7%, affordability continues to erode, prompting KB Home to lean on incentives like mortgage rate buydowns and base price adjustments—tactics that are squeezing margins across the sector.
The company’s housing gross profit margin dropped to 19.7% from 21.2% a year ago. Executives now expect that figure to slide further, guiding for a margin of 19.0% to 19.4% for the full fiscal year. Backlog metrics were also concerning: the number of homes in backlog fell 24% to 4,776, while the total value of that pipeline dropped to $2.3 billion—a 27% decline.
Municipal delays in community approvals further impacted spring sales, missing opportunities to close several hundred deals, according to management.
Building Efficiency While Pulling Back on Expansion
Despite the pressures, KB Home is taking measured steps to control what it can. The company has improved build times by an average of seven days—returning to pre-pandemic levels—and cut back on land investment to preserve liquidity. More than $500 million was spent on land acquisition and development in the quarter, but additional activity is expected to be paced more conservatively going forward.
Meanwhile, KB Home’s cash position and capital structure remain healthy. The company reported $1.2 billion in liquidity, including $309 million in cash, and maintains a debt-to-capital ratio of 32.2%. Book value per share grew to nearly $59, up 10% year-over-year.
The sizable $200 million buyback effort not only softened the blow to earnings per share, but also signaled confidence in long-term value. Shares were repurchased at an average price of about $54—well below the company’s book value—giving shareholders a meaningful return boost even as operations faced challenges.
Despite the pressures, KB Home is taking measured steps to control what it can. The company has improved build times by an average of seven days—returning to pre-pandemic levels—and cut back on land investment to preserve liquidity. More than $500 million was spent on land acquisition and development in the quarter, but additional activity is expected to be paced more conservatively going forward.
Meanwhile, KB Home’s cash position and capital structure remain healthy. The company reported $1.2 billion in liquidity, including $309 million in cash, and maintains a debt-to-capital ratio of 32.2%. Book value per share grew to nearly $59, up 10% year-over-year.
The sizable $200 million buyback effort not only softened the blow to earnings per share, but also signaled confidence in long-term value. Shares were repurchased at an average price of about $54—well below the company’s book value—giving shareholders a meaningful return boost even as operations faced challenges.
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