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KB Home Shares Jump as Truist Cites Stronger Margin Outlook

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KB Home Shares Jump as Truist Cites Stronger Margin Outlook

KB Home (KBH) shares jumped in Wednesday trading with Truist Securities attributing the market's positive post-earnings response to the homebuilder's improving gross margins.

Late Tuesday, the company reported mixed fiscal second-quarter results, with per-share earnings coming in weaker than Wall Street's expectations even as revenue topped estimates. It issued third-quarter guidance and updated its full-year outlook.

The shares rose 17% in Wednesday afternoon trading. They have climbed 9% this year.

"We were skeptical mid-quarter that (KB Home) would actually be able to execute on their back half margin expansion, but came away from the call more positive and have adjusted our estimates for 2027 back up to where they were following the company's (first-quarter) earnings release," Truist said Tuesday in a report.

For the third quarter, KB Home is projecting deliveries of 2,600 to 2,800 homes and housing revenue of $1.2 billion to $1.35 billion. Those estimates reflect improvement from 2,395 deliveries and housing revenue of $1.11 billion in the prior quarter. They also indicate housing gross profit margin in the range of 16% to 16.6%, assuming no inventory-related charges, while Wall Street expected 15.7%, Truist said.

The company raised its full-year guidance for deliveries to 10,500 to 11,000 homes from the previous range of 10,000 to 11,500 homes. It narrowed its full-year housing revenue outlook to $4.9 billion to $5.3 billion from the previous range of $4.8 billion to $5.5 billion. It introduced full-year housing gross profit margin guidance in the range of 16.1% to 16.5%, which Truist said was ahead of the 15.7% consensus.

"As we anticipated and is evident in our guidance, we are expecting sequential growth in deliveries, revenue and gross margin in our third quarter, and again, in our fourth quarter," CEO Robert McGibney said during an earnings conference call late Tuesday, according to a FactSet transcript. "Specific to our third-quarter deliveries, more than 80% of these homes are already in our backlog."

Truist raised its EPS estimates for KB Home to $3.24 from $3.18 for 2026, and to $4.94 from $4.60 for 2027. It raised its price target on the stock to $56 from $50 and maintained its hold rating.

Price: $61.59, Change: $+8.86, Percent Change: +16.79%

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