NVR - KB Home stock bucks homebuilder rally after Q4 earnings disappoint

KB Home ( NYSE: KBH ) stock is on track to be the sole decliner among homebuilders for Thursday's session, sliding 2.6% in afternoon trading, after the company posted worse-than-expected Q4 earnings and revenue highlighting a substantial drop in new orders.

Q4 EPS of $2.47, falling short of the $2.86 average analyst estimate, climbed from $1.91 in the year-ago period. Likewise, revenue of $1.94B, missing the $1.99B consensus, gained from $1.68B a year before.

“While favorable demographics and a prolonged undersupply of homes give us confidence in the housing market's long-term outlook, current conditions remain challenging," said Chairman, President and CEO Jeffrey Mezger, while noting high mortgage rates combined with stubbornly high inflation and and economic uncertainty "have made homebuyers more cautious since the middle of last year."

Perhaps one of the most notable signals that demand has dropped is the sharp decrease in KBH's Q4 net orders, which came in at 692 versus 3,529 a year earlier. Also, its cancellation rate rate as a percentage of gross orders jumped to 68% Y/Y from just 13%.

The company also issued guidance for Q1 2023. It expects housing revenues in the range of $1.25B-$1.40B with an expected average selling price of $490K-$500K.

Homebuilding operating income as a percentage of revenues for Q1 is seen to be 9.5% to 10.5%, assuming no inventory-related charges.

In the run-up to Thursday's close, practically all homebuilder stocks, with the exception of KBH, look to finish in the green. PulteGroup ( NYSE: PHM ) +1%, D.R. Horton ( NYSE: DHI ) +0.1% , Toll Brothers ( NYSE: TOL ) +1.2% , Lennar ( NYSE: LEN ) +0.4% , Beazer Homes +1% , Tri Pointe Homes ( NYSE: TPH ) +0.6% , Hovnanian Enterprises ( NYSE: HOV ) +0.7% and NVR ( NYSE: NVR ) +0.4% . The S&P 1500 Composite Homebuilding Index (SP1500-25201030) also gained 0.4% .

Take a look at Seeking Alpha contributor Leo Nelissen's take on KB Home's disappointing Q4 results .

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