2026 third quarter
Filed Sep 22, 2026KB HOME REPORTS 2026 THIRD QUARTER RESULTS
Third-quarter revenue, deliveries, operating income, net income and diluted earnings per share declined year over year, while net orders, backlog value, community count and the adjusted housing gross profit margin improved sequentially according to management.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $ 1,297,101 (In Thousands) | – | down 20% |
| Homebuilding revenuesGAAP | $ 1,292,350 (In Thousands) | – | – |
| Financial services revenuesGAAP | $ 4,751 (In Thousands) | – | – |
| Housing revenuesGAAP | $ 1,292,350 (In Thousands) | – | – |
| Homes deliveredother | 2,732 | – | decreased 19% |
| Average selling priceother | $ 473,000 | – | – |
| Housing gross profitsGAAP | 213,760 (In Thousands) | – | – |
| Housing gross profit marginGAAP | 16.5% | – | – |
| Inventory-related chargesGAAP | 2,986 (In Thousands) | – | – |
| Adjusted housing gross profitsnon-GAAP | $ 216,746 (In Thousands) | – | – |
| Adjusted housing gross profit marginnon-GAAP | 16.8% | – | – |
| Selling, general and administrative expensesGAAP | 146,626 (In Thousands) | – | – |
| Selling, general and administrative expenses as a percentage of housing revenuesGAAP | 11.3% | – | – |
| Homebuilding operating incomeGAAP | 67,134 (In Thousands) | – | – |
| Homebuilding operating income marginGAAP | 5.2% | – | – |
| Homebuilding operating income margin excluding inventory-related chargesnon-GAAP | 5.4% | – | – |
| Financial services pretax incomeGAAP | 7,381 (In Thousands) | – | – |
| Total pretax incomeGAAP | 81,180 (In Thousands) | – | – |
| Net incomeGAAP | $ 65,280 (In Thousands) | – | – |
| Effective tax rateGAAP | 19.6% | – | – |
| Basic earnings per shareGAAP | $ 1.07 | – | – |
| Diluted earnings per shareGAAP | $ 1.05 | – | – |
| Net ordersother | 2,604 | – | decreased 12% |
| Net order valueother | $ 1,207,224 (In Thousands) | – | – |
| Monthly net orders per communityother | 3.1 | – | – |
| Cancellation rate as a percentage of gross ordersother | 18% | – | – |
| Homes in backlogother | 4,398 | – | up 2% |
| Backlog valueother | $ 2,053,208 (In Thousands) | – | up 3% |
| Average community countother | 279 | – | grew 8% |
| Ending community countother | 277 | – | up 5% |
| Nine-month total revenuesGAAP | $ 3,486,547 (In Thousands) | – | – |
| Nine-month homes deliveredother | 7,497 | – | down 19% |
| Nine-month average selling priceother | $ 462,900 | – | decreased 5% |
| Nine-month net incomeGAAP | $ 126,053 (In Thousands) | – | – |
| Nine-month diluted earnings per shareGAAP | $ 2.00 | – | – |
| Nine-month housing gross profit marginGAAP | 15.7% | – | – |
| Nine-month adjusted housing gross profit marginnon-GAAP | 16.1% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| HomebuildingOperating income was affected by a lower housing gross profit margin and a higher selling, general and administrative expense ratio. | $ 1,292,350 (In Thousands) | – | – |
| Financial servicesLower results from title and insurance operations. | $ 4,751 (In Thousands) | – | – |
2026 Fourth Quarter and 2026 Full Year outlook
- Revenue2026 Fourth Quarter: Housing revenues in the range of $1.45 billion to $1.65 billion. 2026 Full Year: Housing revenues in the range of $4.90 billion to $5.10 billion.
- Gross margin2026 Fourth Quarter: Housing gross profit margin in the range of 16.0% to 16.6%, assuming no inventory-related charges. 2026 Full Year: Housing gross profit margin in the range of 16.0% to 16.2%, assuming no inventory-related charges.
- Operating expenses2026 Fourth Quarter: Selling, general and administrative expenses as a percentage of revenues in the range of 10.3% to 10.9%. 2026 Full Year: Selling, general and administrative expenses as a percentage of revenues in the range of 11.5% to 11.7%.
- Tax rate2026 Fourth Quarter: Effective tax rate of approximately 26%. 2026 Full Year: Effective tax rate of approximately 23%.
- Note2026 Fourth Quarter: Deliveries in the range of 3,000 to 3,500 homes.
- Note2026 Fourth Quarter: Ending community count in the range of 270 to 275.
- Note2026 Full Year: Deliveries in the range of 10,500 to 11,000 homes.
Capital returns
- In the 2026 third quarter, the Company repurchased .9 million shares of its outstanding common stock at a cost of $50.0 million.
- For the nine months ended August 31, 2026, the Company repurchased 3.1 million shares at a total cost of $175.0 million.
- As of August 31, 2026, the Company had $725.0 million remaining under its current common stock repurchase authorization.
- Stockholders’ equity totaled $3.80 billion, compared to $3.90 billion, primarily reflecting common stock repurchases and cash dividends for the nine months ended August 31, 2026, partly offset by net income for the same period.
What drove it
- Management said higher mortgage interest rates pressured affordability, while geopolitical uncertainty and broader economic headwinds made prospective buyers more cautious.
- BTO homes represented nearly three-quarters of third-quarter deliveries and contributed to the sequentially higher housing gross profit margin.
- Management cited significant new community openings over the past year and year-over-year community count growth.
- The housing gross profit margin reflected continued pricing pressure, higher relative land costs and reduced operating leverage.
- The selling, general and administrative expense ratio rose mainly due to lower operating leverage, partly offset by lower performance-based employee compensation costs and personnel reductions.
- Pretax income included a $3.5 million gain on the sale of an equity investment in a privately held technology company.
- The lower effective tax rate mainly reflected excess tax benefits from stock-based compensation in the current period.
Concerns
- Third-quarter revenues were down 20%, homes delivered decreased 19%, and net orders decreased 12% year over year.
- Housing gross profit margin was 16.5%, compared to 18.2%, and homebuilding operating income margin was 5.2%, compared to 8.1%.
- Monthly net orders per community were 3.1, compared to 3.8, while the cancellation rate was 18%, compared to 17%.
- Notes payable rose to $2.11 billion from $1.69 billion and the debt to capital ratio rose to 35.7% from 30.3%.
- Management described housing-market conditions as challenging and weakening since its June earnings report.
What to watch
- Fourth-quarter deliveries in the range of 3,000 to 3,500 homes.
- Fourth-quarter housing revenues in the range of $1.45 billion to $1.65 billion.
- Fourth-quarter housing gross profit margin in the range of 16.0% to 16.6%, assuming no inventory-related charges.
- Fourth-quarter selling, general and administrative expenses as a percentage of revenues in the range of 10.3% to 10.9%.
- Fourth-quarter ending community count in the range of 270 to 275.
- Order pace, cancellation rate, backlog conversion and the affordability effect of mortgage interest rates.
- Land investment, inventory levels, Credit Facility borrowings and debt to capital.
Balance sheet and cash flow
- Total liquidity was $942.4 million, including $159.0 million of cash and cash equivalents and $783.4 million of available capacity under the Credit Facility.
- Cash borrowings outstanding under the Credit Facility were $415.0 million.
- Inventories increased 5% to $5.98 billion.
- Notes payable were $2.11 billion, compared to $1.69 billion.
- Debt to capital ratio was 35.7%, compared to 30.3%. As of August 31, 2025, the debt to capital ratio was 33.2%.
- Investments in land and land development for the quarter increased 40% to $722.3 million, compared to $514.1 million for the prior-year quarter.
- For the nine months ended August 31, 2026, total land-related investments decreased 8% to $1.79 billion, compared to $1.95 billion for the year-earlier period.
- Lots owned or under contract decreased 5% to 61,581, of which approximately 60% were owned and 40% were under contract.
- Stockholders’ equity totaled $3.80 billion, compared to $3.90 billion.
- Book value per share of $62.56 increased 4% year over year based on approximately 60.8 million outstanding shares as of August 31, 2026.
Analysis
KB Home reported a weaker year-over-year third quarter, with total revenues of $ 1,297,101 (In Thousands), down 20%, as homes delivered decreased 19% to 2,732. Average selling price was $ 473,000 compared with $ 475,700. Net income was $ 65,280 (In Thousands), versus $ 109,828 (In Thousands), and diluted earnings per share was $ 1.05 versus $ 1.61. For the first nine months, total revenues were $ 3,486,547 (In Thousands), net income was $ 126,053 (In Thousands), and diluted earnings per share was $ 2.00.
Margins compressed materially from the prior year. Housing gross profit margin was 16.5%, compared with 18.2%, while adjusted housing gross profit margin was 16.8%, compared with 18.9%. Homebuilding operating income was 67,134 (In Thousands), compared with 131,163 (In Thousands), and the operating income margin was 5.2%, compared with 8.1%. The company attributed gross-margin pressure to continued pricing pressure, higher relative land costs and reduced operating leverage. Selling, general and administrative expenses increased to 11.3% of housing revenues from 10.0%, mainly because of lower operating leverage.
Demand indicators remained soft on a year-over-year basis, though backlog expanded. Net orders of 2,604 decreased 12%, monthly net orders per community fell to 3.1 from 3.8, and the cancellation rate increased to 18% from 17%. Ending backlog increased for the first time in four years, with homes in backlog up 2% to 4,398 and backlog value up 3% to $ 2,053,208 (In Thousands). The average community count grew 8% to 279, and ending community count was up 5% to 277. Management linked the demand backdrop to affordability pressure from higher mortgage interest rates and greater buyer caution.
The balance sheet reflects continued land investment and higher leverage. Inventories increased 5% to $5.98 billion, quarterly investments in land and land development increased 40% to $722.3 million, and notes payable increased to $2.11 billion from $1.69 billion. The debt to capital ratio was 35.7%, compared with 30.3%. Liquidity was $942.4 million, including $159.0 million of cash and cash equivalents and $783.4 million of Credit Facility capacity. The company repurchased .9 million shares for $50.0 million in the quarter and 3.1 million shares for $175.0 million in the first nine months.
Fourth-quarter guidance calls for 3,000 to 3,500 deliveries, housing revenues of $1.45 billion to $1.65 billion and housing gross profit margin of 16.0% to 16.6%, assuming no inventory-related charges. Full-year guidance calls for 10,500 to 11,000 deliveries, housing revenues of $4.90 billion to $5.10 billion and housing gross profit margin of 16.0% to 16.2%, assuming no inventory-related charges. Management said it continues to expect full-year deliveries, housing revenues and margins to be within ranges last provided.
Management, verbatim
We are operating in a housing market that continues to be challenging, with conditions weakening since our June earnings report. Higher mortgage interest rates have further pressured affordability and, together with geopolitical uncertainty and broader economic headwinds, have caused many prospective buyers to be more cautious on purchasing a home.
Jeffrey Mezger, Executive Chairman
We also made significant progress and have now achieved our goal of returning to a predominantly Built to Order business, with BTO homes representing nearly three-quarters of our deliveries in the third quarter, which contributed to our sequentially higher housing gross profit margin.
Robert McGibney, President and Chief Executive Officer
Looking ahead to the remainder of this fiscal year, we continue to expect our full-year deliveries, housing revenues and margins to be within the ranges we last provided.
Jeffrey Mezger, Executive Chairman
Not in the filing
stated, not guessed- Previous-release outlook was not provided, so comparison of actual results with prior guidance is unavailable.
- Prior-quarter figures and quarter-over-quarter changes for reported metrics were not provided.
- Operating cash flow was not provided.
- Free cash flow was not provided.
- A quarterly or nine-month cash-dividend amount was not provided.
- Non-GAAP earnings per share, net income and operating income were not provided.
- A numerical year-over-year comparison for average community count and ending community count was not provided.
- A numerical year-over-year percentage change for financial services revenues and homebuilding revenues was not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.