Looking back on home builders stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including KB Home (NYSE: KBH) and its peers.
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
The 11 home builders stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 2.8% while next quarter’s revenue guidance was in line.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
KB Home (NYSE: KBH)
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.
KB Home reported revenues of $1.62 billion, down 7.5% year on year. This print exceeded analysts’ expectations by 1.2%. Despite the top-line beat, it was still a slower quarter for the company with a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ backlog estimates.
“We achieved solid financial results in our third quarter, meeting or exceeding our guidance ranges across the key metrics for our business. Operationally, our execution was outstanding, as we continued to make meaningful progress in reducing both our build times and costs to build,” said Jeffrey Mezger, Chairman and Chief Executive Officer.
KB Home delivered the weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 3% since reporting and currently trades at $60.50.
Read our full report on KB Home here, it’s free for active Edge members.
Best Q3: Champion Homes (NYSE: SKY)
Founded in 1951, Champion Homes (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.
Champion Homes reported revenues of $684.4 million, up 11% year on year, outperforming analysts’ expectations by 6.9%. The business had an incredible quarter with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.
Champion Homes pulled off the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 21.6% since reporting. It currently trades at $80.97.
Is now the time to buy Champion Homes? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Meritage Homes (NYSE: MTH)
Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE: MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.
Meritage Homes reported revenues of $1.42 billion, down 10.8% year on year, falling short of analysts’ expectations by 3.4%. It was a disappointing quarter as it posted a significant miss of analysts’ revenue estimates and a significant miss of analysts’ adjusted operating income estimates.
Meritage Homes delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 7.9% since the results and currently trades at $65.43.
Read our full analysis of Meritage Homes’s results here.
Lennar (NYSE: LEN)
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Lennar reported revenues of $8.81 billion, down 6.4% year on year. This print came in 2.7% below analysts' expectations. It was a softer quarter as it also recorded a significant miss of analysts’ revenue estimates and a significant miss of analysts’ adjusted operating income estimates.
The stock is down 9% since reporting and currently trades at $121.
Read our full, actionable report on Lennar here, it’s free for active Edge members.
LGI Homes (NASDAQ: LGIH)
Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
LGI Homes reported revenues of $396.6 million, down 39.2% year on year. This result topped analysts’ expectations by 1.6%. Taking a step back, it was a softer quarter as it produced a significant miss of analysts’ adjusted operating income estimates and a significant miss of analysts’ EBITDA estimates.
LGI Homes had the slowest revenue growth among its peers. The stock is up 13.3% since reporting and currently trades at $46.17.
Read our full, actionable report on LGI Homes here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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