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Why KB Home Stock Got Slammed Today

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

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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.

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Stocks Mentioned

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

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