Bear of the Day: KB Home (KBH)

KB Home (KBH) continues to face challenging market conditions in the housing market. This Zacks Rank #5 (Strong Sell) is expected to see another year of declining earnings.

KB Home is one of the largest homebuilders in the United States. It operates in 49 markets and has built nearly 700,000 homes over the last 65 years.

KB Home Meets in the Fiscal First Quarter 2026 But Guidance Disappoints

On Mar 24, 2026, KB Home reported its fiscal first quarter 2026 results and met on the Zacks Consensus Estimate of $0.52.

This quarter reflects the start of the spring home buying season, which officially kicks off the week after the Super Bowl.

Revenue fell 23% to $1.08 billion and homes delivered declined 14% to 2,370.

The adjusted gross profit margin was 15.5%, compared with 20.3% in the year ago quarter, primarily reflecting price reductions, higher relative land costs, product and geographic mix, and reduced operating leverage.

Gross profit margin is a key fundamental for home builders. A reading under 20 usually indicates a bear market.

The average selling price fell to $452,100 from $500,700 a year ago.

KB Home saw solid traffic to its communities during the quarter, with year-over-year net order growth.

It’s also achieving its targeted mix of Built to Order net orders, which are higher margins than spec homes. This is expected to contribute to stronger financial results in the second half of the fiscal year.

"Concerns surrounding the conflict in the Middle East have introduced an additional layer of uncertainty for consumers who were already working through numerous challenges,” said Jeffrey Mezger, Executive Chairman.

Analysts Cut KB Home Fiscal 2026 and 2027 Earnings Estimates

2026 was supposed to be the year of the housing market turnaround, but that seems unlikely now.

KB Home guided a gross profit margin in the range of 15% to 15.6%, assuming no inventory-related charges, for the fiscal second quarter of 2026.

6 estimates were cut in the last 30 days, pushing the fiscal 2026 Zacks Consensus Estimate down to $3.55 from $4.16. That’s a decline in earnings of 45.6% as the company made $6.52 last year.

6 estimates were also cut for fiscal 2027 over the prior month as well, pushing the Zacks Consensus down to $4.76 from $5.61. That’s earnings growth of 33.9%, however. But it’s going in the wrong direction.

Here’s what it looks like on the price and consensus chart.

Image Source: Zacks Investment Research

Shares of KB Home Sink in the Last Six Months

With housing not seeing a turnaround during the spring buying season, it’s not surprising that the shares of KB Home have been weak over the last 6 months.

Here is KB Home compared to the S&P 500 ETF (VOO).

Image Source: Zacks Investment Research

KB Home is attractively priced with a forward price-to-earnings (P/E) of 14.3. A P/E under 15 is usually considered a value.

However, it also has the characteristics of a “trap” with the earnings expected to fall 45.6% this year.

KB Home is shareholder friendly. It pays a dividend currently yielding 2%.

But until the buyers return to the housing market, a homebuilder company like KB Home could be a tough place to park some money. Investors should watch the earnings estimates for a turn.

Housing has been in a recession for several years. At some point, it will come out of it.

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This article originally published on Zacks Investment Research (zacks.com).

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