Markets Tumble as Investors Weigh KB Home, H.B. Fuller Results

Wall Street finally lost its upward momentum after a huge bounce that had brought massive gains in just the past week and a half. Fears about a quick schedule of interest rate hikes from the Federal Reserve and sustained higher oil prices weighed on market sentiment. By the end of the day, the S&P 500 (^GSPC -0.43%), Dow Jones Industrial Average (^DJI -0.91%), and Nasdaq Composite (^IXIC -0.66%) were all down more than 1%.

Data source: Yahoo! Finance.

After the market closed, investors got to see financial results from a couple of companies with some ties to very different parts of the economy. KB Home (KBH -0.74%) offered a look at how the housing market is reacting to all the news on Wall Street, while H.B. Fuller's (FUL -1.60%) specialty chemicals business showed how consumers and businesses are changing their spending patterns. We'll take a closer look at both reports below.

Image source: Getty Images.

KB Home loses ground

Shares of KB Home were down almost 4% in after-hours trading late Wednesday. The homebuilder's  fiscal first-quarter results showed substantial growth, but investors seemed troubled by what the future might bring despite an optimistic outlook.

KB Home's first-quarter numbers reflected favorable conditions for the housing market. Revenue came in at $1.40 billion, up 23% year over year. Nearly all of those gains stemmed from higher average sales prices, which climbed 22% to $486,100. Home delivery volume was close to unchanged at 2,868. Those higher prices were enough to cover rising materials costs, as operating margin jumped 2.2 percentage points to 12.2%. Earnings of $1.47 per share were up 44% from year-ago levels.

Moreover, KB Home sees the good times continuing. It provided full-year fiscal 2022 guidance for revenue of $7.2 billion to $7.6 billion, which would represent growth of 26% to 33% from fiscal 2021 levels. Average prices should keep climbing to between $490,000 and $500,000, with solid margin figures as well. Backlogs of $5.71 billion rose 55% year over year and signaled strong demand ahead.

Right now, limited inventories of existing homes are supporting prices even as mortgage rates rise. However, if the Fed accelerates its rate hike schedule, that could price out some marginal buyers and potentially start to make the real estate market turn. That seems to be the concern among investors, despite numbers that were quite impressive.

Fuller keeps growing

Investors had mixed views on H.B. Fuller's first-quarter financial results. Initially , the stock climbed in after-hours trading immediately following the announcement, but it fell back to unchanged by 5 p.m. ET.

Fuller's first-quarter numbers showed solid growth. Sales climbed 18% on a 21% rise in organic revenue, and exemplary business execution and substantial gains in product volume helped bolster net income. Adjusted earnings came in at $0.80 per share, up 21% year over year.

Looking ahead, Fuller expects that its recent acquisitions of Apollo and Fourny should help expand the presence of its construction adhesives business in the key European market. CEO Jim Owens sees the strength in its organic business as a natural consequence of its multiyear strategic plan, and Fuller is succeeding in its efforts to deliver cutting-edge adhesive products to meet the needs of all of its clients.

Best of all, Fuller expects it will be able to pass through higher petrochemical supply costs to its customers, helping it maintain margin strength. With a boost to full-year guidance predicting organic revenue growth of 15% to 20% and new earnings projections of $4.10 to $4.35 per share, Fuller looks like it's moving full speed ahead.