KB Home (NYSE: KBH) stock plunged 15.34% on November 16th, 2018 after the company provided lower than expected guidance for its coming fourth quarter results. The lowered guidance was due an expected negative impact on our central region deliveries from the historic range experienced in Texas, fewer than anticipated spec sales and deliveries, and potential delayed closings over the next couple of weeks in California due to impacts from the recent large wildfires. Credit Suisse, Wells Fargo, Barclays and Wedbush all slashed their price targets on KB Home stock. Bank of America Merrill Lynch cut both its rating to neutral from buy and its price target to $24 a share from $26 a share.
The company expects housing revenues for the fourth quarter to be in the range of $1.31 [billion] to $1.34 billion, lower relative to prior guidance of $1.39 billion to $1.45 billion. Wall Street previously expected KB Home to report revenue of $1.43 billion in the fourth quarter, according to a FactSet survey. KB Home also said it expects net orders for the first 10 weeks of the fourth quarter to be down 14% year over year.
Meanwhile, KBH announced the grand opening of Metro II, its latest collection of new single-family homes in the desirable Communications Hill master plan community. Building upon the success of KB Home’s popular Metro community, Metro II is conveniently located near major highways and the Caltrain Capitol Station for easy commuting to Silicon Valley and throughout the greater Bay Area.
Residents of Metro II can enjoy numerous community amenities, including hiking and walking trails, parks and the Grand Staircase in Tuscany Hills, a local recreation hotspot that features incredible views of Silicon Valley. Prime shopping, dining and entertainment are available at nearby Santana Row and downtown San Jose. Metro II is located in the Franklin-McKinley School District.
On the other hand, KBH has declared a quarterly cash dividend of $.025 per share on the Company’s common stock, payable on November 29, 2018 to stockholders of record on November 15, 2018.
For the third quarter, KBH had reported 7% growth in the total revenue to $1.23 billion. Deliveries rose 8% to 2,988 homes. Homebuilding operating income increased 38% to $105.6 million. Homebuilding operating income margin improved 190 basis points to 8.6%. Excluding inventory-related charges of $8.4 million in the quarter and $8.1 million in the year-earlier quarter, this metric improved to 9.3% from 7.4%. Net income rose 74% to $87.5 million during the third quarter.