KB Homes’ Quarterlies Confirm Housing’s Hopes – and Fears

KB Homes (KBH – NYSE)

Tuesday, September 24, 2013

We finally have hard data to weigh against Washington’s smoke and mirrors.

Today, KB Homes (KBH – NYSE) quarterlies framed the whole real estate argument perfectly.

Looking back, KBH’s earnings beat by +33%, and deliveries were up +6% year over year.

But looking forward, net orders are down -3% month over month — and down -9% year over year. And, Q3‘s cancellation rate as a percentage of gross orders was 33% in 2013 compared to 29% in 2012.

KBH is trying to fight the trend by boosting profits per home, but that means either raising prices or cutting delivered value, which will only accelerate the falloff in net sales growth.

KBH 092413

Bottarelli Research Tip: KBH saw a short-term rally moving into its announcement. But now, price is rejoining KBH’s long-term falling trend, which began with May’s 3x Sell Signal Stack and was confirmed by August’s Death Cross. A drop to $14.98 is a lock, and a follow-on move $12.59 is reasonably probable.

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