KB Home (NYSE:KBH) stock fell 3.09% (As on January 12, 10:49:29 AM UTC-4, Source: Google Finance) after the company  reported revenue and profits that missed estimates in the fourth quarter as its net orders plunged and the value of its backlog fell 25% against the same quarter last year. The company reported a backlog of over 7,600 homes valued about $3.7 billion, a 27% drop in units and a 25% drop in value compared to the same quarter last year. In the fourth quarter, the company’s net orders totaled 692 home, down 80% from 3,529 in the same quarter last year. Gross orders for the company fell 47% during the quarter, and cancellation rates as a percentage of gross orders totaled 68% compared to 13% a year ago. Housing has been under pressure amid the Fed’s aggressive tightening campaign to tame sky-high inflation. The hikes led to an increased cost of borrowing that reflected in higher mortgage rates, sidelining more first-time home buyers.

KBH in the fourth quarter of FY 22 has reported the adjusted earnings per share of $2.47, missing the analysts’ estimates for the adjusted earnings per share of $2.86, according to Bloomberg consensus. The company had reported the adjusted revenue growth of 16 percent to $1.94 billion in the fourth quarter of FY 22, missing the analysts’ estimates for revenue of $1.98 billion. Homes delivered increased 3% to 3,786. Average selling price rose 13% to $510,400. Homebuilding operating income grew 30% to $278.2 million. The homebuilding operating income margin increased to 14.4%, compared to 12.8%. The housing gross profit margin increased 10 basis points to 22.4%. Net income of $216.4 million, increased 24%. The Company’s financial services operations generated pretax income of $6.7 million, compared to $9.9 million, due to a decrease in the equity in income of its mortgage banking joint venture, KBHS Home Loans, LLC (“KBHS”), reflecting significant homebuyer interest rate lock commitments in the 2022 second quarter that pulled forward a portion of KBHS’ earnings, as well as increased competitive pressures in the current quarter.

In the first quarter, the company expects housing revenue to fall in a range between $1.25 billion and $1.40 billion, with average selling prices falling between $490,000 and $500,000. Profit margins are expected to fall between 20% and 21% in the first quarter. The company gave no color on what expectations are for gross margins in 2023.