KB Home Q3 Earnings Call Highlights

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.

KB Home 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.

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.

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. 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. Fourth-quarter outlook moderated While KB Home maintained its full-year delivery, ...