Builder KB Home (NYSE:KBH) will report third-quarter results Thursday. Considering the state of the housing industry, it's safe to assume that our expectations haven't been built up.

What analysts say:

  • Buy, sell, or waffle? With nine analysts covering KB Home, you might be surprised to learn that none encourage selling. Seven of them do say "hold," while two actually think the builder's a buy.
  • Revenue. Because revenue is expected to fall 43% this quarter to $1.5 billion, it might raise an eyebrow that anyone is bullish here.
  • Earnings. Couple that with a shift from $2.46 profits last year to $0.67 per-share losses this time around, and it's difficult to see where we should drive the golden nail.

What management says:
Analysts had been similarly "buoyant" about rival Lennar's (NYSE:LEN) third-quarter results. They had anticipated $0.58-per-share losses, but the country's largest homebuilder posted the largest loss in its history, some $3.25 per share. That says a lot about how far the industry is spiraling downward. KB Home may find itself similarly surprising analysts to the downside.

The National Association of Realtors also reported that existing home sales have dropped for the sixth month in a row, reaching their lowest level in five years. Existing homes make up 85% of this market, which even the half-percentage point interest rate cut by the Fed can't stimulate.

What management does:
KB Home operates on a build-to-order model that may make things worse for itself in this climate. Prices are depressed, and with large backlogs of homes on the market, there's the potential for a far greater crisis. Even the analysts are cottoning to the idea of a worse-than-expected picture for KB Home. Just last quarter, they were anticipating that the company would post a profit. Now, a mega-loss like Lennar's is a very real possibility.

Margins

5/06

8/06

11/06

2/07

5/07

Gross

26.9%

26.0%

21.7%

20.3%

18.1%

Operating

14.8%

13.8%

9.3%

7.5%

5.1%

Net

9.3%

8.4%

4.4%

3.2%

-0.2%

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:
Earlier this year, housing enjoyed a dead-hammer bounce. It was expected that the worst in the market had been realized last November, and the spring selling season would lift the builders out of the doldrums. Sadly, the promise was short-lived, and things only conspired to get worse. Tightening credit, languishing sales, and falling prices have combined to make this the worst housing market in nearly two decades. KB Homes, like Lennar, Toll Brothers (NYSE:TOL), Centex (NYSE:CTX), and others are now clinging to the life raft of a federal interest rate bailout. If that fails to plug the leak, a number of homebuilders might be foreclosed-on themselves.

KB Home, once considered one of the more resilient builders, is on the ropes just like the rest. Let's hope Thursday's picture is the floor upon which it can rebuild its future.

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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.