KB Home Reports Narrower Loss After 73% Jump in Revenue
KB Home (KBH), the best-performing U.S. homebuilder stock this year, reported a narrower loss for its fiscal second quarter as revenue and selling prices jumped.
The net loss for the three months through May was $3 million, or 4 cents a share, compared with a loss of $24.1 million, or 31 cents, a year earlier, the Los Angeles-based company said today in a statement. The average of 23 analyst estimates was for a loss of 5 cents a share, according to data compiled by Bloomberg.
KB Home and other U.S. builders are benefiting from accelerating demand for new houses amid a tight supply of existing homes on the market. New-home sales rose 2.1 percent last month to an annualized pace of 476,000, the most since July 2008, the Commerce Department said two days ago.
“KB Home is well positioned in some of the strongest housing markets across the country,” Jeffrey Mezger, president and chief executive officer, said in the statement. “With the limited supply of homes available for sale and robust demand in many of our served markets, we have deliberately emphasized price and value creation over sales pace.”
Revenue in the quarter increased 73 percent from a year earlier to $524.4 million. Net orders rose 6 percent to 2,162 homes. The company’s contract backlog, an indication of future sales, climbed 6 percent to 3,128 homes.
The average selling price increased 25 percent to $290,400, the highest for a second quarter since 2006.
The company, which has had losses in four of the past six quarters, has lagged behind other builders including Lennar Corp. (LEN), Toll Brothers Inc. (TOL) and D.R. Horton Inc. (DHI) in returning to profitability.
“KB Home is a turnaround story,” Megan McGrath, an analyst at MKM Partners LLC in Stamford, Connecticut, with a buy rating on the stock, said yesterday in a telephone interview. “For them, it’s, ‘What’s the improvement and the trajectory, and how quickly can they narrow the gap with the other builders.’”
The company expects to be profitable for 2013, with “meaningful profits” in the final two quarters of the year, Mezger said on a conference call with analysts. Demand is outpacing supply in all of the company’s markets, even with the recent jump in borrowing costs, he said.
The average rate for a 30-year fixed mortgage rose to 4.46 percent from 3.93 percent, the biggest one-week increase since 1987, McLean, Virginia-based Freddie Mac said today.
“Anecdotally, we are hearing from the sales floor that the uptick in rates has actually created an increased sense of urgency” among buyers, Mezger said on the call.
KB Home fell 1 percent to $19.70 at the close in New York. The shares have gained 25 percent this year, the best performance in the 11-company Standard & Poor’s Supercomposite Homebuilding Index, which advanced 4.8 percent.
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