KB Home Drops to Four-Month Low as Quarterly Loss Widens on Order Decline
KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, fell to its lowest price in four months in New York trading after reporting a bigger-than-expected loss as orders plunged.
The net loss for the quarter ended Feb. 28 widened to $1.49 a share from 71 cents a year earlier, the company said today in a statement. Analysts predicted a loss of 30 cents a share, the average of 17 estimates in a Bloomberg survey.
U.S. homebuilders are struggling with competition from lower-priced distressed properties and weak demand as unemployment hovers close to 9 percent. KB Home has communities in some of the markets hardest-hit by foreclosures, including Las Vegas, Riverside County in California and Phoenix.
“This was a poor quarter for KBH with very weak margins and orders that were well below expectations,” Adam Rudiger, an analyst with Wells Fargo Securities in San Francisco, said in a note to clients.
KB Home fell 51 cents, or 4.2 percent, to $11.69 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has lost 31 percent in the past 12 months, compared with the 12 percent decrease by the Standard & Poor’s Supercomposite Homebuilding Index.
The company plans to boost revenue this year by opening new communities, Chief Executive Officer Jeffrey Mezger said during a call with analysts. KB Home opened 33 developments in the first quarter and plans to start 40 in the second quarter.
New-Home Sales
“We do not anticipate a net profit for 2011,” Mezger said. “However, we maintain that our operating strategy has us positioned to achieve profitability at some point later in 2011.”
Sales of new U.S. homes plunged 16.9 percent in February to a record-low annual pace, the Commerce Department said March 23. The median price for a new house dropped 8.9 percent from a year earlier to lowest in more than seven years.
KB Home’s net loss of $114.5 million included an impairment charge of $53.7 million and a loss on a loan guaranty of $22.8 million, both related to the company’s investment in a development in Henderson, Nevada, the statement said.
Revenue declined 25 percent from a year earlier to $196.9 million and net orders slid 32 percent to 1,302. The company delivered 949 homes in the quarter, down 28 percent from the same period in 2010.
Tighter Credit Requirements
The year-ago orders were boosted by government tax credits valued at as much as $8,000 for first-time homebuyers. The incentive was originally set to expire in November 2009 and later was extended for contracts signed by April 30.
KB Home, which focused early in the real estate slump on smaller, more efficiently designed houses, is competing with rivals who are also appealing to entry-level buyers, said Demir Gjokaj, an analyst with New York-based ITG Investment Research Inc. That task has grown more difficult because lenders are tightening credit requirements, he said.
“There’s two things hobbling them: exposure to the West and exposure to the first-time homebuyer segment,” Gjokaj said.
To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.
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