KB Home Reports Surprise Quarterly Profit as Sales Jump
Net income for the three months through August was $3.3 million, or 4 cents a share, compared with a loss of $9.6 million, or 13 cents, a year earlier, the company said today in a statement. The average of 17 estimates in a Bloomberg survey was for a loss of 15 cents a share.
KB Home benefited from tax and insurance-related gains, as well as higher sales amid a U.S. housing market recovery. Confidence among homebuilders climbed to the highest level in more than six years, the National Association of Home Builders/Wells Fargo sentiment index showed this week. Single- family housing starts rose in August to the fastest annual rate since April 2010, the Commerce Department said Sept. 19.
“The company confirmed that the pace and breadth of the housing market gained momentum over the summer,” Stephen Kim, an analyst with Barclays Plc in New York, said in a note to clients today. “We continue to be believe that 2012 is proving to be the beginning of a sustained housing recovery.”
KB Home jumped 16 percent to $15.26, the biggest gain since November 2008. The stock has climbed 127 percent this year, compared with an 87 percent increase in the Standard & Poor’s Supercomposite Homebuilding Index. (S15HOME)
KB Home’s revenue in the fiscal third quarter jumped 16 percent from a year earlier to $424.5 million. Home deliveries rose 7 percent to 1,720, with 13 percent fewer communities at the end of the quarter. The average selling price of a house was $245,100, up 8 percent from a year earlier and 5 percent from the previous three months.
KB Home is seeing “dramatic improvement” in California, where strengthening in the coastal markets is spreading inland to Sacramento, the Central Valley and east of Los Angeles, Mezger said. The West Coast is the company’s largest market.
“Our West Coast region is a true engine of growth and profit for KB Home,” Chairman and Chief Executive Officer Jeffrey Mezger said on a conference call with analysts.
The results included an insurance recovery of $16.5 million and benefit of $10.7 million tied to the resolution of a federal income tax audit. Excluding one-time items, the company had a loss of 12 cents a share, according to Megan McGrath, an analyst at MKM Partners LLC, and Stephen East, an analyst with International Strategy & Investment Group LLC.
The company’s orders rose 3 percent from a year earlier to 1,900 homes. That number was disappointing, said McGrath, based in Stamford, Connecticut. Orders for 15 publicly traded homebuilders, including KB Home, jumped 27 percent from a year earlier in the second quarter, according to data compiled by Bloomberg Industries.
The profit was KB Home’s first since the end of 2011. Competitors such as D.R Horton Inc. (DHI), Toll Brothers Inc. (TOL), and Lennar Corp. (LEN) have recorded at least four straight quarters of profits.
“They’re improving but the whole group is improving even faster,” East, based in Saint Charles, Missouri, said in a telephone interview.
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