KB Home 2025 Q2 Earnings Revenue Decline and Guidance Revision

KB Home (KBH) reported its fiscal 2025 Q2 earnings on June 23rd, 2025. The homebuilder surpassed analyst expectations with earnings per share (EPS) of $1.50, higher than the anticipated $1.47, despite a decline from last year's $2.15. However, the company adjusted its full-year revenue guidance downward, aligning with market softness. Analysts maintain a "Hold" rating, with a potential 23.10% upside from the current stock price. The revised fiscal year 2025 housing revenue projection is now between $6.30 billion and $6.50 billion.

Revenue

In the second quarter of 2025, KB Home's total revenue fell by 10.5% to $1.53 billion, compared to $1.71 billion in the same quarter of the previous year. The homebuilding segment generated $1.52 billion, while financial services contributed $4.87 million, culminating in a total revenue of $1.53 billion.

Earnings/Net Income

KB Home's EPS dropped 30.8% to $1.53 from $2.21 year-over-year, while net income decreased by 35.9% to $107.88 million from $168.42 million. The significant decline in earnings was driven by various market challenges.

Price Action

The stock price of KB Home rose by 3.84% during the latest trading day, increased by 1.68% over the most recent full trading week, and edged up 0.21% month-to-date.

Post-Earnings Price Action Review

Historically, purchasing KB Home shares following a positive revenue quarter and holding for 30 days has yielded strong returns. Over the past three years, this strategy has delivered an impressive overall return of 73.08%, outperforming the benchmark by 18.54%. With a compound annual growth rate (CAGR) of 20.24% and a Sharpe ratio of 0.56, the strategy indicated robust growth and risk-adjusted performance. However, it also experienced significant volatility, evidenced by a maximum drawdown of -42.30% and a 36.25% peak-to-trough decline. These figures highlight the potential risks and rewards for investors considering this approach.

CEO Commentary

Jeffrey T. Mezger, Chairman & CEO, highlighted solid financial results for Q2 2025, with revenues of $1.53 billion and diluted EPS of $1.50, driven by faster build times and cost reductions. He noted challenges due to consumer confidence and affordability issues, prompting a revision of fiscal 2025 guidance. Mezger emphasized a strategic focus on optimizing assets and balancing pace and price in communities, aiming to return to a historical mix of built-to-order homes. He expressed a cautious yet optimistic outlook, stating, "While longer term, the outlook for the housing market remains favorable... we believe we are navigating market conditions well."

Guidance

For fiscal 2025, KB Home expects housing revenues between $6.30 billion and $6.50 billion, with Q3 housing revenues projected between $1.50 billion and $1.70 billion. The average selling price for Q3 is anticipated to range from $470,000 to $480,000, with an overall average for the year between $480,000 and $490,000. Housing gross profit margin for Q3 is expected to be between 18.1% and 18.7%, while for the full year, it is projected to range from 19% to 19.4%.

Additional News

In recent weeks, KB Home has been actively repurchasing its stock, with $200 million spent in Q2 2025, reflecting a balanced approach to capital allocation amidst market uncertainties. The company also announced a continuation of its buyback program for fiscal 2025, with $450 million remaining under the current authorization. Additionally, amid ongoing market challenges, KB Home has strategically reduced land acquisition and development investments to focus on enhancing shareholder value. The homebuilder plans to sustain this cautious investment approach while maintaining its commitment to returning value to stockholders.