KB Home Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of homebuilder KB Home (NYSE: KBH  ) dropped as much as 11% on Tuesday after posting a wider-than-expected quarterly loss.

So what: Hurt by 32% drop in orders and hefty charges, KB's first-quarter loss widened to $1.49 per share, versus the average analyst estimate of just a $0.30 per-share loss. Government tax credits for first-time homebuyers helped boost KB's year-ago orders, but now its focus on that very same demographic, coupled with heavy exposure to the West Coast, seem to be coming back to bite the company.

Now what: I wouldn't be so quick to pounce on today's plunge. Unfortunately, sales and prices of new homes continue to decline at a record pace, so it's tough to see how any homebuilder will be able to turn things around anytime soon -- just last week, rival Lennar (NYSE: LEN  ) also posted hugely disappointing results. With a few Wall Street analysts now expecting full-year sales decline of as much as 30% for KB, I'd wait for a more encouraging time to place my turnaround bet.

Interested in more info on KB Home? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 06, 2011, at 8:07 AM, hopjmpoop wrote:
  • Report this Comment On April 07, 2011, at 5:18 PM, LemonMeister wrote:

    Mezger KB Home CEO (Up for re-election today) is still lying to the investors; himself and to potential new KB Home buyers, he is ignoring hundreds of properties that KB Home has to buy back because of major construction defects. This set of Directors at KB Home is the worst. None of them are responsible, they do not reply to complaints, like the KB Home owner does not exist, some of us who were conned by KB Home and their non-disclosures (Lies and deceit, anything for them to sell you a bill of goods) stuck in a home so poorly constructed it can’t be sold or rented out. Just Google KB Home sucks and also Google Mirasol in San Antonio, TX. 275 shoddy constructed homes. The FBI should look into KB Home for racketeering? They can’t keep getting away with ripping off consumers while their white collar criminals just walk.

  • Report this Comment On February 26, 2012, at 10:03 PM, KBHomeProblems wrote:

    Our KB Home Experience has been a nightmare, read more at <a href="KB Home Problems"></a>

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