KB Home’s Stock Sinks On Weak Outlook

The stock of KB Home (KBH) is sliding lower after the U.S. homebuilder cut its full-year guidance, saying it expects further weakness in the real estate market.The disappointing outlook overshadowed what was otherwise a strong print from KB Home. The Los Angeles, California-based company announced fiscal second-quarter earnings per share (EPS) of $1.50 U.S., which beat the consensus estimate of $1.47 U.S. Revenue for the quarter ended May 31 was $1.53 billion U.S., beating the $1.51 billion U.S. expected on Wall Street.However, both the top and bottom-line numbers reported for fiscal Q2 were lower than a year ago, when the company’s EPS came in at $2.15 U.S. and its sales totaled $1.71 billion U.S. KB Home also lowered its full-year guidance, saying it now expects revenue of $6.30 billion U.S. to $6.50 billion U.S., down from $6.60 billion U.S. to $7 billion U.S. previously.The company’s homebuilding operating margin fell to 9% from 11.1% a year earlier in the latest quarter. Also, housing gross profit fell to 19.3% from 21.1% a year ago.In the company’s earnings release, KB Home’s CEO Jeffrey Mezger said, “We are scaling back our land acquisition and development investments while increasing share repurchases.”KB Home bought back $200 million U.S. worth of common stock at an average price of $54 U.S. per share in the just completed quarter. Mezger said the company plans to continue repurchasing shares during the rest of this year.The average selling price of a KB Home property was $488,700 U.S. during the quarter, down from $500,700 U.S. in the previous quarter amid ongoing softness in the real estate market. Net orders declined 13% year-over-year to 3,460 and net order value fell 21% to $1.61 billion U.S. KBH stock has declined 18% this year to trade at $53.09 U.S. per share.