KB Home’s fourth quarter was met with a negative market reaction, as the company faced a sharp decline in year-over-year sales and reduced operating margins. Management cited persistent affordability concerns and elevated mortgage rates as significant headwinds that caused buyers to take longer to make purchasing decisions. CEO Jeff Mezger noted, “Consumers are demonstrating their interest in buying a home… They’re just taking much longer to make their home buying decisions.” The company maintained a disciplined approach to pricing, resisting aggressive incentives to preserve margin integrity, but this resulted in slower order growth and ongoing pressure from aged inventory built at higher costs impacting near-term profitability.
Is now the time to buy KBH? Find out in our full research report (it’s free for active Edge members).
KB Home (KBH) Q4 CY2025 Highlights:
- Revenue: $1.69 billion vs analyst estimates of $1.66 billion (15.3% year-on-year decline, 2.3% beat)
- Adjusted EPS: $1.92 vs analyst estimates of $1.79 (7.4% beat)
- Adjusted EBITDA: $141.1 million vs analyst estimates of $190.3 million (8.3% margin, 25.9% miss)
- Operating Margin: 7.3%, down from 11.7% in the same quarter last year
- Backlog: $1.40 billion at quarter end, down 37.4% year on year
- Market Capitalization: $3.63 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From KB Home’s Q4 Earnings Call
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John Lovallo (UBS) questioned the apparent conservatism in margin guidance and whether aged inventory would further impact margins. CFO Rob Dillard replied that the guidance reflects realistic assumptions, with short-term pressure from older, higher-cost specs, but expects improvement as these are cleared.
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Stephen Kim (Evercore ISI) asked about the mechanics of the built-to-order shift and whether new community openings make the transition easier. President Rob McGibney explained that faster build times now make built-to-order homes more attractive, reducing the need for specs and allowing greater focus on personalization benefits.
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Alan Ratner (Zelman & Associates) inquired about the competitive landscape and the company’s discipline in avoiding aggressive incentives. McGibney said pricing remained stable, with incentives primarily limited to mortgage concessions on aged inventory, and expressed confidence in the value proposition of personalized homes over discounted spec offerings.
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Rafe Jadrosich (Bank of America) pressed for expectations on the built-to-order mix trajectory and gross margin recovery. McGibney confirmed the mix is likely to remain near current levels initially, with a targeted return to 70% as the year progresses, and margins expected to improve as the mix shifts.
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Sam Reid (Wells Fargo) asked about the range of delivery outcomes and whether guidance assumes different levels of built-to-order versus spec sales. McGibney clarified that the delivery range is driven by uncertainty around spring demand, not by a change in strategy, and the plan is to push built-to-order sales even if it means accepting lower volume at the low end of guidance.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace and success of the built-to-order mix transition across new and existing communities, (2) the impact of new community openings—especially in higher-priced markets—on both average selling prices and order growth, and (3) signs of improved margin trajectory as aged inventory is worked down. The evolution of affordability trends and mortgage rates will remain crucial external factors for monitoring demand resilience.
KB Home currently trades at $57.47, down from $62.75 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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