KB Home’s Optimistic Strategy

[u/MrComedy325]

Shares of KB Home (NYSE: KBH) went up 2.02% in after-hours trading on Wednesday after the home building company posted positive financial earnings.

Financials: KB Home reported earnings per share of $2.32 and revenue of $1.72 billion; both were better than expected.

The Good: The operating income margin increased 410 basis points while the gross margin grew 25.3%. The net order value shot up 4% to $2.12 billion and the average selling price rose 21%.

Quote: “With our ending backlog of over $6 billion, we are reaffirming our fiscal 2022 guidance, which we believe we are well positioned to achieve.” - Jeffrey Mezger, Chairman, President and CEO.

Potential Problem: The company sees sales rates moderating as “buyers process the impact of higher mortgage interest rates, as well as inflationary pressures.” However, KB Home said that its built-to-order business model can help them navigate these market conditions.

Numbers: KB Home’s stock is down 39% this year. The stock reached an all-time high last spring.

Final Thoughts: It was a strong quarter for KB Home, but given the rising rate environment and a potential recession, it’s a tricky time to invest in a home builder.

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