KB Home Posts Orders That Miss Estimates, Sending Shares Down

(Bloomberg) -- KB Home reported orders for the second quarter that missed expectations, sending shares sliding and signaling it could be bumpy road as homebuilders recover from the pandemic.

• The company’s orders for the second quarter fell to 1,758 from 4,064 a year earlier, according to a statement Wednesday. Analysts surveyed by Bloomberg were expecting 3,450. The company’s sales also missed estimates.

Key Insights

• Homebuilders were hit hard when the pandemic shut down the U.S. economy, but they’ve bounced back in recent weeks on indications that demand for homes is strong, particularly with record-low mortgage rates. But KB’s focus on first-time buyers could be a challenge, as many Americans struggle to afford houses.
• KB Home has a built-to-order model, which means that it doesn’t have much standing inventory available for buyers, many of whom are especially anxious now to move quickly. KB has a heavy presence in California and Las Vegas, which have not performed well during the pandemic.
• The company‘s results are disappointing given the strength elsewhere in the industry. New home sales jumped 16.6% in May. KB said its business bounced back in the first three weeks of June, with orders returning to “more normalized levels” after the quarter ended.

Market Insights

KB shares fell as much as 8.2% to 30.60 in late trading The stock was down 2.7% this year through Wednesday’s close. It has nearly tripled since March 23, when the market hit bottom.

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