Homebuilder KB Home (NYSE: KBH) reported revenue ahead of Wall Streets expectations in Q4 CY2025, but sales fell by 15.3% year on year to $1.69 billion. Its non-GAAP profit of $1.92 per share was 7.4% above analysts’ consensus estimates.

Is now the time to buy KB Home? Find out by accessing our full research report, it’s free for active Edge members.

“We closed our 2025 fiscal year on a positive note, meeting or exceeding nearly all our fourth quarter financial targets. Although housing market conditions remained challenging due to lower consumer confidence, affordability concerns and elevated mortgage interest rates, we were pleased to help nearly 13,000 individuals and families achieve the dream of homeownership during the year, while maintaining our industry-leading customer satisfaction ratings,” said Jeffrey Mezger, Chairman and Chief Executive Officer.

Company Overview

The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, KB Home’s 8.3% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. KB Home’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.4% over the last two years.

KB Home also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. KB Home’s backlog reached $1.40 billion in the latest quarter and averaged 21.6% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, KB Home’s revenue fell by 15.3% year on year to $1.69 billion but beat Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to decline by 7.8% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend.

Operating Margin

KB Home has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, KB Home’s operating margin decreased by 3.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, KB Home generated an operating margin profit margin of 6.9%, down 4.8 percentage points year on year. Since KB Home’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

KB Home’s EPS grew at a spectacular 15.8% compounded annual growth rate over the last five years, higher than its 8.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of KB Home’s earnings can give us a better understanding of its performance. A five-year view shows that KB Home has repurchased its stock, shrinking its share count by 31.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For KB Home, its two-year annual EPS declines of 4.1% mark a reversal from its (seemingly) healthy five-year trend. We hope KB Home can return to earnings growth in the future.

In Q4, KB Home reported adjusted EPS of $1.92, down from $2.52 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 7.4%. Over the next 12 months, Wall Street expects KB Home’s full-year EPS of $6.52 to shrink by 8.2%.

Key Takeaways from KB Home’s Q4 Results

We enjoyed seeing KB Home beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its backlog fell short of Wall Street’s estimates, and this is weighing on shares since backlog is a leading indicator of future revenue. Overall, this was a mixed quarter. The stock traded down 5.1% to $59.55 immediately after reporting.

KB Home didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.