KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, rose the most in three years after reporting a narrower quarterly loss as it sold more houses at higher prices.
The net loss for the fiscal second quarter ended May 31 was $24.1 million, or 31 cents a share, compared with a loss of $68.5 million, or 89 cents, a year earlier, the company said today in a statement. The average of 18 estimates in a Bloomberg survey was for a loss of 35 cents a share.
Record-low borrowing costs and a dwindling inventory of houses on the market are helping to strengthen U.S. new-home sales. Purchases of new U.S. houses rose in May to a two-year high, the Commerce Department said this week. Contracts to buy previously owned homes rose 5.9 percent last month, matching a two-year high reached in March, the National Association of Realtors reported.
“The overall housing market appears to have largely stabilized and is moving into a period of recovery,” KB Home Chief Executive Officer Jeffrey Mezger said during a conference call today. “Dynamics have improved significantly over the past 90 days, as compared to late last year, or early this year, with declining inventory levels and heightened consumer demand.”
The shares climbed 13 percent to $9.80 at the close of trading in New York, the biggest advance since March 2009. The stock was the best performer of the 11-member Standard and Poor’s 1500 Homebuilding Index, which gained 4.8 percent.
KB Home’s rally reduced the stock’s decline for the past 12 months to 2.8 percent. That’s still the worst performance in the S&P index, which has surged 43 percent.
KB Home has had losses in eight of the last 10 quarters. The second-quarter loss included $9.9 million in costs tied to inventory impairments, and a $4.5 million tax benefit. The year- earlier period included $20.6 million in inventory impairments and land option contract abandonments and costs of $14.6 million related to the company’s investment in a Henderson, Nevada, development.
KB Home’s revenue for the quarter climbed 11 percent to $302.9 million. Home deliveries rose 2 percent to 1,290 houses. The average selling price jumped 9 percent to $233,000.
Orders increased 3 percent from a year earlier to 2,049 houses. Backlog, an indication of future sales, climbed 22 percent from a year earlier to 2,962 homes.
While KB Home is getting a boost from rising demand, customers have struggled to get financing. In March, the company made Nationstar Mortgage Holdings Inc. (NSM) its preferred lender after MetLife Inc. (MET) announced earlier this year that it would shut its origination operation. Nationstar began accepting loan applications in May.
KB Home said in today’s statement that its transition to Nationstar is “progressing as planned” and will result in “improved mortgage origination execution” for homebuyers. In the first quarter, cancellations spiked because customers had problems getting financing, the company said at the time.
“Apparently the new arrangement with Nationstar Mortgage is working, so that’s a positive,” Michael Widner, an analyst with Stifel Nicolaus & Co. in Baltimore, said today in a note to clients. “But we had kind of hoped maybe some of the would-be- sales from last quarter’s shortfall would get pushed into this quarter as the ability to provide financing improved.”
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