Please ensure Javascript is enabled for purposes of website accessibility

Why KB Home's Shares Plunged 19% Today

By Travis Hoium - Nov 15, 2018 at 10:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Could the good times be coming to an end for homebuilders?

What happened 

Shares of KB Home (KBH 4.18%) fell as much as 19.1% in early trading after the homebuilder gave investors weaker-than-expected guidance and reported disappointing bookings. The stock was still down 18% at 11:10 a.m. EST. 

So what

Management now expects $1.31 billion to $1.34 billion in revenue in the fourth quarter, falling well below the analyst forecast of $1.44 billion. They also said that through 10 weeks of the fourth quarter, bookings were down 14% versus a year ago, indicating an imminent revenue slowdown. 

Homes under construction.

Image source: Getty Images.

First-quarter 2019 guidance was down to $800 million to $860 million with operating income margin of just 3.6% to 4.6%. Revenue, in particular, fell well short of the $897 million that analysts were expecting and is another sign that a housing slowdown may be coming. 

Now what

It's been a great decade for homebuilders, but rising interest rates could take a bite out of business over the next few years. It looks as if that's what we're seeing right now in KB Home's guidance and why shares are selling off. Keep an eye on earnings over the next few quarters to see if the trend continues or reverses because that will drive the stock, and potentially the entire economy, over the long term. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

KB Home Stock Quote
KB Home
KBH
$29.65 (4.18%) $1.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.