KB Home (KBH) Stock Forecast & Price Target

KB Home's positive outlook is supported by anticipated stronger demand leading to increased volumes and pricing, which is expected to drive significant earnings growth compared to prior expectations. The company’s regional mix positions it favorably against competitors, even in the face of macroeconomic challenges like rising interest rates and new home supply, evidenced by key operating trends such as increased closings and up orders, alongside stable gross margin guidance for the coming quarters. Additionally, the potential for rising demand, lower mortgage rates, improved margins, and share buyback initiatives present significant upside risks that could further enhance the company's financial performance.

KB Home's financial outlook has become increasingly negative, with the estimated return on tangible equity (ROTE) for FY’25 declining to 14.5% from 15.8%, and projected earnings per share (EPS) for FY’26 estimated at $9.08, which falls below the Street's expectation of $9.98. Key risks affecting the company's performance include a slowdown in the housing market, particularly in California—where over a third of its revenue is generated—due to worsening affordability and slowing economic growth, compounded by rising mortgage rates that adversely impact demand at the entry level. Additionally, the company faces significant margin pressures from rising land costs and limited growth opportunities in core California markets, potentially leading to declining gross margins and reduced financial performance.