Please ensure Javascript is enabled for purposes of website accessibility

Why KB Home Stock Got Slammed Today

By Jon Quast – Updated Jun 25, 2020 at 1:40PM

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

Net orders plummeted a whopping 57%, and new coronavirus fears could hold back any recovery.

What happened

Shares of homebuilding company KB Home (KBH 5.35%) got slammed on Thursday, after the company reported results for the second quarter of 2020. As of 11:30 a.m. EDT, the stock was down 12%.

KB Home's net orders plummeted 57% year over year in Q2, making investors nervous its backlog is drying up.

A man places his hands on his face in frustration with a down stock chart in the background.

Image source: Getty Images.

So what

Wait -- weren't we in the middle of a pandemic in Q2? While it was logical to assume net orders would be down because of COVID-19, Wall Street wasn't expecting a 57% drop. Consider that fellow homebuilder Lennar Corporation already reported Q2 results as well, and new orders were only down 10%. 

However, just looking at KB Home's ending backlog, Q2 results look a little brighter. The company ended the quarter with a backlog of 5,080 homes -- only down 14% from last year. Furthermore, the value of the backlog is only down 12% to $1.9 billion. For comparison, the value of Lennar's backlog fell 8% in Q2.

Now what

The real estate industry is quickly rebounding, and KB Home has noticed the trend as well. Its business has been improving since April, and net orders for the first three weeks of June are actually up 2% compared to June 2019. That's an encouraging development for shareholders of this construction stock.

However, KB Home threw some cold water on any potential excitement. Its press release ended by saying if coronavirus cases start going back up, its business could revert back to the bad results it posted for March and April. The timing of this realistic warning couldn't be worse, as several U.S. states are reporting an uptick in confirmed cases. 

Until there's some resolution with the coronavirus, it's likely this shadow will hang over KB Home stock.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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
$28.77 (5.35%) $1.46
Lennar Corporation Stock Quote
Lennar Corporation
LEN
$80.91 (3.52%) $2.75

*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
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

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.