KB Home will post its fiscal 4Q2008 and year-end results tomorrow morning, and consensus on the Street is that the bleeding will continue despite the recent lift in home builder stocks.

The title of analyst and financial writer Elizabeth Harrow's post yesterday all but sums up the outlook: "Expectations approach rock-bottom for KB's fourth-quarter earnings."

She wrote:

"Analysts are expecting KBH to swallow a loss of $1.19 per share, which would represent a marked improvement from the home builder's year-ago loss of $9.99 per share.

"However, if history is any indication, there's a good chance KB Home's results will fall short of the Street's predictions. The company has disappointed analysts in each of the previous five quarters by reporting wider-than-expected losses."

However, Pali Capital's Stephen East was a bit more optimistic. In a research note released yesterday, he said he expected the company's quarterly loss to be roughly $0.23 per share, mostly driven by a slashing of SG&A costs. Last quarter SG&A as a percentage of revenues topped 19.9%. At that level, "reducing overhead is a major priority," said CFO Dom Cecere during an earnings call. However, Cecere noted that management already had taken some measures to reduce SG&A, including consolidating roughly seven divisions and trimming headcount by another 18% during the fiscal third quarter, but their positive effects had yet to hit the balance sheet.

East also expected the company's cash flow to be a high note for the quarter. He estimated that cash generation for the quarter will be in the range of $100 million to $150 million.

But even heaps of cash on the balance sheet--the company had $942.5 million in cash at the end of its fiscal 3Q2008--management won't be able to hide from a continued fall-off in new orders. East said: "The most dismal part of the release will likely be the orders trend. Orders at KBH have been massively sideswiped thanks to a variety of factors. We believe unit orders will fall 54%, offset a bit by an average selling price increasing 21% thanks to an aberration in pricing last year. All regions should be dismal, with the Central region showing the best order rate, likely down 40%, and the Southwest the worst, down 65%. On this metric, the focus should be whether KBH has been able to solve the dilemma of creating an entry-level product that can compete with foreclosures and still turn a profit."

At the end of the third quarter, management announced that the company would pursue yet another new product strategy, which included additional down sizing and down spec-ing of homes. The strategy is intended to help the company reduce its average selling price, making its homes more competitive against the glut of for-sale existing homes and foreclosures. CEO Jeffrey Mezger said that in early-adopter markets such as California's Inland Empire, response to the new product had been largely positive.

In addition to the issue of margins and profitability, another hot topic during tomorrow afternoon's earning call likely will be the potential benefit for the company if Congress decides to extend the look-back period for net operating loss tax carry backs from two years to five years as part of a new economic stimulus package.

To date, KB's executive team has not been very aggressive compared to some of the company's peers in pursuing tax carry back refunds. According to UBS analyst David Goldberg, from 2005 to 2007, the company paid roughly $650.3 million in taxes; to date, it has recaptured $220.0 million, or roughly 34%. Moreover, Mezger noted in last quarter's earnings call that a carry back-motivated bulk land sales was not in the works for the fourth quarter.