KB Home

KB Home reported 3Q fiscal 2026 housing revenues of $1.3 billion, net income of $65 million, and diluted EPS of $1.05. Housing revenues declined 20% from $1.6 billion a year ago, while diluted EPS fell from $1.61 and net income fell from $110 million. Homebuilding operating income was $67 million versus $131 million last year; housing gross profit margin was 16.5% versus 18.2%, and adjusted gross margin was 16.8% versus 18.9%. Deliveries were 2,732 homes, backlog conversion was 60% versus 71% a year ago, and BTO homes were 74% of deliveries. For 4Q, the company expects deliveries of 3,000 to 3,500 and housing revenues of $1.45 billion to $1.65 billion. Full-year delivery guidance is 10,500 to 11,000 homes, housing revenue is narrowed to $4.9 billion to $5.1 billion, full-year gross margin is expected at 16% to 16.2% (assuming no inventory charges), and 4Q gross margin is expected at 16% to 16.6%. Management also expects 4Q ASP of about $480,000 versus roughly $500,000 implied by prior guidance, and a 4Q SG&A ratio of 10.3% to 10.9%.

Jeff Mezger said the housing market weakened further since the last call, with higher mortgage rates, persistent inflation, geopolitical uncertainty, and rising resale inventory pressuring demand and pricing. He stressed that KB Home’s disciplined capital allocation remains intact, highlighting nearly $725 million invested in land development, more than $65 million returned to shareholders in the quarter, and up to $50 million of additional repurchases planned for 4Q. His tone was cautious on the near term but confident that the company’s balance sheet, geographic footprint, and long-tenured team position it to benefit when conditions improve.

Bill Hollinger said 3Q results were solid despite the tougher backdrop, with revenue of $1.3 billion, net income of $65 million, EPS of $1.05, and operating income of $67 million. He detailed that housing gross margin was 16.5% and adjusted gross margin was 16.8%, both below last year but better sequentially, and noted that 4Q margin should be lower sequentially because of pricing pressure, higher costs, and mix shifts. On the balance sheet, he cited $159 million of cash, $942 million of total liquidity, $783 million available under the unsecured credit facility with $415 million drawn, and a debt-to-capital ratio of 35.7%.

Analysts pressed on whether the 4Q mix is a guide for early 2027, and management said Southern California weakness and some missed higher-ASP openings are driving the near-term change, but they do not expect that weakness to persist in the same way. Questions on cost inflation focused mostly on materials, fuel surcharges, and land-development fees; management said labor has not been a major issue at the jobsite level and that cost pressure is more on the material side. Other questions covered long-term gross margin targets, and Rob McGibney reaffirmed the 22% target while saying market conditions have delayed progress. Analysts also asked about resale competition, rates, and capital returns; management said rate moves are still pausing buyers, resale inventory is a real competitor market by market, and buybacks/dividends will remain programmatic and opportunistic.