Despite the positive outlook held by its top executives as they reported third-quarter earnings, shares in KB Home dropped in September. 

Then, last month, the stock price of the Westwood-based homebuilder was on a roller coaster. It began the month closing at $45.87 on Oct. 2 and closed at $44.20 on Oct. 31, a drop of more than 3.5%. 

But in between the price fluctuated. On Oct. 11, for example, it closed at $45.71 and the following day it lost $2.52 of its value, or 5.5%, to close at $43.19. Perhaps it was the news that KB announced on Oct. 11 about the grand opening of Olive Grove, its latest new-home community in Durham, North Carolina that set the stock price falling.  

But then the stock price went up 1.5% the next day – Oct. 13 – after the company announced after the market closed the day before that it had opened a new community in Florida. Analysts could give no rationale on why the stock fluctuated as it did on the announcements.

The share price closed at $43.86 that day. 

The stock price went up for the next two days before dropping again, and then rising once more to close at $48.86 on Nov. 2.

Big builder

Westwood-based KB Home was founded in 1957 in Detroit by Donald Kaufman and Eli Broad – the K and the B in its name. 

They grew the company into one of the premier residential homebuilders in the country. It has been recognized multiple times on the Builder 100 list of top companies in the United States and was included on Fortune’s 2023 Change the World list, recognizing the home builder for its sustainability leadership. 

That announcement, however, did not cause the stock price to increase. 

It closed at $46.28 the day the Change the World listing was announced on Sept. 29 and dropped by 41 cents, or just less than 1%, by the close of the next trading day on Oct. 2 to $45.87.

Still, that percentage drop was not as bad as what happened a couple weeks before. 

The stock price of the company went down by 4.3% from when it closed on Sept. 20 – the day it revealed its quarterly earnings – at $48.06 to the following day’s closing price of $46.  

On Sept. 20, the company reported net income of $150 million ($1.80 a share) for the quarter ending Aug. 31, compared with net income of $255 million ($2.86) in the same period a year earlier. Revenue decreased by 14% from the third quarter of the prior year to $1.6 billion. 

KB will release its fiscal fourth-quarter financials in early January. 

Jeff Mezger, chief executive of KB Home, said during a conference call on Sept. 20 to discuss third-quarter earnings with analysts, that even with half of its buyers purchasing their first home during the third quarter, it was attracting buyers above its targeted income levels with healthy credit who can qualify at elevated mortgage rates and make a significant down payment. 

“These data points underscore the solid demand amid the lack of supply,” Mezger said. 

KB increased its land investment during the quarter by $100 million to spend about $550 million to both acquire and develop land while remaining diligent with respect to its underwriting criteria, product strategy and price points, he added. 

“We expect to accelerate our investment activity in the fourth quarter and beyond to support our future growth targets,” Mezger said.