Homebuilder KB Home (NYSE:KBH) reports its Q2 2006 numbers tomorrow. But does it really matter what the company says? At a trailing P/E of 4.3, you can't go wrong with this stock -- or can you?

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts follow KB, and last quarter's consensus is breaking up. Seven of them still call the stock a buy; holds are now up to six, and there's still one seller.
  • Revenues. Sales are expected to rise 24% in tomorrow's news, to $2.64 billion.
  • Earnings. Profits are predicted to rise a bit slower, to $2.44 per share, for 18% growth.

What management says:
Last quarter, KB CEO Bruce Karatz issued the corporate equivalent of Mark Twain's "News of my death is greatly exaggerated" line, calling his company's first-quarter results "a great start for our 2006 fiscal year," and going on to reiterate "earnings guidance of $11.25 per diluted share for the year, which represents an increase of 18% over its 2005 diluted earnings per share."

What Karatz didn't say, but did imply, is that KB has the means at its disposal to force its numbers to hit that target if need be. KB bought back 2 million of its shares in Q1, and the company confirmed that it has authorization to buy back 8 million more at the right price. So long as the firm doesn't see its total profits slide too much, that authorization -- to reduce, by as much as 8%, the shares among which firmwide profits are divided -- makes it much more likely that KB can hit its per-share earnings target, come what may.

What management does:
KB's rolling margins had been rising consistently for some time before stalling out last quarter. While that shouldn't detract from the company's admirable record of posting all of gross, operating, and net margin growth, it does set a Fool to wondering whether this plateau will be followed by another cliff face reaching upwards -- or just a cliff. Analysts are currently predicting the latter; earlier this month, Wachovia, for instance, downgraded homebuilders en masse, slamming Pulte (NYSE:PHM), Lennar (NYSE:LEN), KB, and DR Horton (NYSE:DHI).

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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Let's go back to the firm's buyback plan for a moment. Last quarter, KB spent $154.4 million to buy back 2 million shares -- that's an average price of $77.36 per share, according to the 10-Q. And what do those shares cost now? At $43.30, that's not a particularly good return on capital, in this Fool's view.

I'd love to see KB turn in stronger-than-expected margins tomorrow, grow its sales faster than anyone had dreamed, and reassure investors that no, all is not lost in housing, and that people are still buying into the American dream at a healthy pace. But to be brutally honest, what I'd really like to see is confirmation that KB has stopped burning its shareholders' cash in an attempt to buck up a flagging stock price.

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Fool contributor Rich Smith does not own shares of any company named above.