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KB Home Strong Revenue Growth Fails to Impress InvestorsDespite beating revenue expectations, KB Home (NYSE: NYSE:KBH ) saw its stock drop sharply after its Q3 CY2024 earnings report. The homebuilder's robust revenue growth of 10% year-over-year, reaching $1.75 billion, coupled with strong net earnings per share ($2.04), failed to prevent a significant decline in after-hours trading, where shares dropped 6%. This price action has left many investors questioning the sustainability of KB Home's stock, particularly amid rising interest rates and shifting housing demand. Fundamental Overview At first glance, KB Home’s fundamentals appear solid. Revenue of $1.75 billion exceeded analyst estimates of $1.73 billion by a margin of 1.4%, and their profit per share came in at $2.04, only slightly missing the consensus of $2.06. The company’s sales were buoyed by strong demand for affordably priced homes, especially as mortgage rates saw some moderation toward the end of the quarter. However, several metrics raised concerns: 1. Gross Margin Decline: KB Home (NYSE: NYSE:KBH ) reported a 20.6% housing gross profit margin for Q3 2024, down from 21.5% in the same quarter last year. The slight decline reflects a mix of geographic factors and rising construction costs, particularly as the company expanded into different markets. 2. Backlog Decline: The company's backlog, a key indicator of future revenue, dropped 14% year-over-year to $2.92 billion, reflecting slower future sales growth. This decline, coupled with flat net orders for the quarter, is a worrying sign that demand might be softening in the coming quarters. 3. Inventory Build-Up: Inventories increased by 10%, indicating a cautious approach by the company, perhaps anticipating further slowdowns in demand or higher costs to meet future projects. 4. Capital Deployment: KB Home (NYSE: NYSE:KBH ) has focused on returning capital to shareholders, repurchasing $150 million in stock during the quarter, which brings their total repurchases for the year to $250 million. This capital deployment strategy reflects confidence in their long-term prospects, despite near-term headwinds. Technical Outlook Technically, NYSE:KBH was trading in a long-standing rising trend before the earnings report. The stock’s year-to-date performance had been impressive, rising nearly 40% through Tuesday's close. However, after the earnings release, the stock dipped 6% in after-hours trading, signaling potential bearish momentum. Key technical indicators to watch: 1. Ascending Triangle Breakdown: Prior to the earnings release, NYSE:KBH was forming an ascending triangle, a bullish pattern suggesting the potential for a breakout. However, the failure to surpass the upper trendline combined with below-expectation EPS has triggered a breakdown below the lower trendline, indicating that further price correction may be in play. 2. Support Levels: Investors should closely watch the following support levels: - $79: A key pivot where the stock found support between July and early September. A break below this level could lead to a stronger selloff. - $72: This level coincides with the rising 200-day moving average, a critical support line from a technical standpoint. If the stock falls here, it may attract buyers seeking a longer-term opportunity. - $64: If bearish momentum accelerates, this level would mark a significant retracement to the consolidation range seen earlier this year, potentially representing a more substantial correction. 3. Relative Strength Index (RSI): On Tuesday, KB Home (NYSE: NYSE:KBH ) closed with an RSI of 60.65, suggesting that the stock was neither overbought nor oversold. As of Wednesday morning pre-market trading, the stock was down 6.78%, and the RSI has dropped, signaling that the stock is approaching oversold territory. This dip could indicate a short-term buying opportunity if it stabilizes around key support zones. Market Dynamics and Interest Rates While KB Home (NYSE: NYSE:KBH ) managed to grow revenues and deliver solid earnings, the broader macroeconomic environment is weighing heavily on the stock. Elevated mortgage rates, which have been rising due to the Federal Reserve’s tightening cycle, continue to act as a headwind for homebuilders like KB Home (NYSE: NYSE:KBH ). The third quarter saw some softening in demand, particularly in June and July, as potential homebuyers struggled with the affordability crisis driven by higher rates. However, in August, as mortgage rates slightly moderated, KB Home (NYSE: NYSE:KBH ) noted an uptick in net orders. This underscores the sensitivity of the housing market to even small changes in interest rates. A sustained decrease in rates could drive renewed demand, especially for KB Home’s affordably priced homes. Long-Term Prospects and Guidance Looking ahead, KB Home (NYSE: NYSE:KBH ) remains optimistic, providing guidance for full-year 2024 housing revenues between $6.85 billion and $6.95 billion, with an average selling price of approximately $490,000. The company expects its homebuilding operating income margin to hover between 11.1% and 11.2%, assuming no significant inventory-related charges. CEO Jeffrey Mezger highlighted the company’s focus on both reinvestment and returning capital to shareholders, including their aggressive stock buyback program. The company’s investments in land acquisition and development are up 59% year-over-year, signaling a long-term commitment to growth even amid challenging market conditions. Conclusion: KB Home’s Q3 CY2024 performance demonstrates a strong foundation with decent revenue growth, solid earnings, and a disciplined approach to capital deployment. However, investors have reacted negatively due to lower margins, flat net orders, and concerns about the broader housing market. Technically, the stock appears to be at a critical juncture. The breakdown of the ascending triangle, combined with a sharp post-earnings selloff, suggests further downside potential. Investors should closely monitor support levels around $79 and $72 for potential buying opportunities. From a long-term perspective, the company’s investments in land and its ability to maintain profitability in a tough market are positive signs. However, until mortgage rates stabilize, the stock may remain volatile in the near term. That said, any signs of rate moderation could lead to a sharp rebound, especially given the company’s positioning in the affordable housing market.
NYSE:KBHShort
by DEXWireNews
2
RECESSION ALERT - Homebuilders WAY Overbought | SHORT $KBHLeverage. It's a beautiful thing. There is not much to say about this one, the chart speaks for itself. Brief Disclaimer: this chart has evaded me - I personally think it should have corrected awhile ago (see grey arrows). Nonetheless, I never bought it... WHY?: The economy is now well into a recession (has been for at least a year). For whatever reason this thing was bought into the stratosphere. Now comes profit-taking and the COLLAPSE! This baby is going DEEP! Thank you for playing. 💀💀💀
NYSE:KBHShort
by ChiefMacro
1
KBH Bearish inclined naked puts 1 Sep expiryThere is a lack of existing inventory on the market as many existing homeowners are hesitant to sell because of rising interest rates. If interest rates are cut or halted and we experience a soft landing, there will initially be a burst of growth before it stagnantes or sinks - Since March 2023 housing as a sector has a broad uptrend alignment. - Buffet is also betting big on housing 110 PUT Contracts sold Strike 48 (9.78% from strike) 0.23 BP 76K Premium 2530 I am recording this trade two days after I entered. Because of the high US notes we have seen two broad based drops that has resulted in me being 1% away from strike. Today I remembered why I was trying to shy away from selling options. Because of the poor Risk/Reward if a trade goes against you. I probably close this tonight and take the loss unless price stays above 48 which is also a S&R point
NYSE:KBHLong
by Ronin_trader
Next Stock Market Collapse in mid 2026? $KBH - the guiding lightIt is almost impossible for a layman or retail investor like me to know roughly when stock market will collapse or goes through big correction, unless i am part of the mastermind of Goldman Sach, JP Morgan and colluding with politicians Hence, i look at charts repeatedly day in and day out in order to find out if there is any "cyclical pattern" which is NOT noticeable to the rest Though nothing is for certaint, while screening through charts, i bumped into this historical KBH stock chart Using the simple assumption that when economy is growing generally, residential construction in the United States can be taken generally as a good indicator from the 80's to late 90's, price was fluctuating in large side way range in the form of inverted head and shoulders before piercing pass the median line and skyrocketed in upper channel towards the channel top. This exceptional growth period took place from early 2022 after the 2000 dotcom bust and took about 3.5 year before peaking, consolidating and collapsed Again, if my interpretation is correct, since end 2007 until end 2022, price of KBH has been gyrating side way massively and formed a gigantic inverted head and shoulders. Price has retested and successfully found support at the median channel line and has been going up for at least 8 months. IF AND ONLY IF, the same 3.5 years of skyrocketing price repeats as drawn in Oval shape, we will start worry about market collapse around Mid-2026 Whether i am correct or close enough with such "prediction", it remains to be seen until later. Meanwhile, i also monitor the inverted yield curve which seems pretty bad. So i am open to any possibility. This is solely my research interest and must not be take as a solicit for anyone to buy or sell any stocks.
NYSE:KBH
by jangseohee
KBH Chart: Macro Resistance TEST - What Next?!Here we are looking at KBH on the Weekly TF… As you can see, KBH currently testing a MACRO downwards sloping resistance line dating back to the early 2000’s. When assessing where it is, it’s important to note two interrelated factors. The first factor we need to consider is that KBH is currently breaking out from the downwards sloping resistance line. The weekly candle is coming to a close, and it is looking like it will close above the trend line. The second factor we must consider is that A LOT of charts are VERY over extended, and have slightly breached their MACRO resistance lines. To me, this seems like a potential good time to short, despite the slight breakout of this line. It seems in line with the many over extended charts in the market. Paired with the weary fundamentals (high interest rates for example), this may be a good time to start considering longer term swing short entries! I will continue to monitor this chart, and provide timely updates as I see fit! Cheers!!
NYSE:KBH
by GarethSolowayOfficial
KB Homes USA Sun Storm Investment Trading Desk & NexGen Wealth Management Service Present's: SSITD & NexGen Portfolio of the Week Series Focus: Worldwide By Sun Storm Investment Research & NexGen Wealth Management Service A Profit & Solutions Strategy & Research Trading | Investment | Stocks | ETF | Mutual Funds | Crypto | Bonds | Options | Dividend | Futures | USA | Canada | UK | Germany | France | Italy | Rest of Europe | Mexico | India Disclaimer: Sun Storm Investment and NexGen are not registered financial advisors, so please do your own research before trading & investing anything. This is information is for only research purposes not for actual trading & investing decision. #debadipb #profitsolutions
NYSE:KBH
by Sunstorminvest
Pull Back Fishing Falling Wedge GartleyLooks like a Bullish Gartley pattern as well. The AB retracement leg should be .618 of XA. The CD leg should be a .786 retracement of XA, or close for a bullish Gartley pattern. Possible stop under first or last bottom, or under D. The first bottom (blue star) is not a deep bottom and appears to be part of a smaller pull back. Falling wedges can be bullish during a pull back and slope down which is against the larger, long term trend. The 2 trendlines converge at the apex. A FW can signal that selling pressure may be easing off. No recommendation. Focus and simplicity. Simplicity can be harder than complex.
NYSE:KBHLong
by lauralea