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KB Home Has Narrower Quarterly Loss as Home Sales Increase

Friday, 29 June 2012 09:26 AM

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, reported a narrower loss and higher orders for the fiscal second quarter as the company sold more houses at higher prices. The shares climbed.

The net loss for the three months 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. 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. its preferred lender after MetLife Inc. announced earlier this year that it would shut its origination operation. Nationstar began accepting loan applications in May.

“The rising tide is bringing more and more buyers into homebuilders’ nets,” Stephen Kim, an analyst with Barclays Capital in New York who has a positive rating, the equivalent of a buy, on KB Home, said before results were announced. “KB Home has a hole in their net that they need to fix, and they’re fixing it,” he said of the mortgage-lender change.

Shares Jump

The stock climbed 11 percent to $9.63 at 8:49 a.m. New York time.

KB Home, the worst performer of the 11-member Standard and Poor’s 1500 Homebuilding Index in the past 12 months, 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.

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.

Selling Prices

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.

“Entering the second half of 2012, we have a strong backlog of homes with higher selling prices and better margins to help restore profitability,” Chief Executive Officer Jeffrey Mezger said in the statement.

KB Home rose 1.1 percent yesterday to $8.70. It has declined 27 percent in the 12 months through yesterday, compared with a 34 percent gain for the S&P homebuilding index.

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Friday, 29 June 2012 09:26 AM
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