Homebuilders eagerly await a rebound this year. But it isn’t happening. Key home buying indicators such as prices, new construction, and building permits keep sinking. The result: Most homebuilders are awash in red ink.
KB Home (KBH) is one of them. The Los Angeles-based homebuilder saw first-quarter orders dive to 1,302 versus 1,913 last year, which CEO Jeffrey Mezger attributed to the “temporarily elevated level of activity from the federal homebuyer tax credit.”
Yet KB Home has lots going for it. The company has built more than a half million affordable, high-quality homes since its founding in 1957 using a build-to-order formula. And innovative sustainability initiatives have earned the homebuilder many awards. KB Home prices are staying strong, rising 4 percent to $205,700 in the first quarter.
Sagging orders are weighing the builder down, though. First quarter revenues dipped 25 percent to $196.9 million from $264 million the year before. The company posted a net loss of $114.5 million, or $1.49 per diluted share, in the quarter.
Analysts project more losses. The consensus earnings estimate for 2011 is a $1.71 loss per share. But they expect positive earnings of 42 cents, driven by growing revenue, in 2012.
A selloff signal
So is KB Home a buy? UBS analysts recently upgraded their rating on KB Home to neutral from sell, citing a stronger stock selloff than its peers.
Altogether, the 22 analysts tracked by Thompson/First Call have mixed opinions. Five have strong buy recommendations, with four buys, 12 holds, and one underperform.
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