KB Home Q2 Results Top Estimates

(RTTNews) - Home builder KB Home (KBH) reported Tuesday a profit for the second quarter that more than halved from last year, despite housing revenue growth, reflecting lower housing gross margins and higher expenses. However, both earnings per share and quarterly revenues topped analysts' expectations.

"Our strong net order performance during the spring selling season underscores the success of our community expansion initiative and the broad appeal of our products and distinctive home-buying experience, as well as healthy demand in our served markets," President and CEO Jeffrey Mezger said.

The Los Angeles, California-based company reported net income of $9.57 million or $0.10 per share for the second quarter, lower than $26.62 million or $0.27 per share in the prior-year quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.08 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 10 percent to $622.97 million from $565.01 million in the same quarter last year, and topped thirteen Wall Street analysts' consensus estimate of $619.05 million by a whisker.

Housing revenues rose 8 percent to $604.9 million from last year, reflecting higher home deliveries and improved average selling prices. Financial services revenues declined to $2.17 million from $2.61 million last year.

The company delivered 1,787 homes at an average selling price of $338,500 during the second quarter, higher than 1,751 homes delivered at an average selling price of $319,700 in the year-ago quarter.

Housing gross margin for the quarter contracted 290 basis points to 16 percent from last year's 18.9 percent.

As a percentage of housing revenues, selling, general and administrative expenses also increased 20 basis points to 13.0 percent from the prior-year quarter.

Company-wide net orders for the quarter increased 33 percent to 3,015 homes, with net order value up 38 percent to $1.05 billion. The cancellation rate as a percentage of gross orders improved to 22 percent, compared to 28 percent in the year-ago quarter.

Backlog as at May 31 totaled 4,733 homes, representing potential future housing revenues of about $1.61 billion, up 56 percent from $1.03 billion last year amid increases across all four regions.

Looking ahead, Mezger said, "We are confident that we have the strategic drivers in place to produce measurable year-over-year earnings growth in the second half of 2015 as we realize higher revenues from our larger operational platform and anticipate generating further sequential margin improvement from our recently opened communities and additional scale as the year progresses."

In Friday's regular trading session, KBH is currently trading at $15.82, up $0.86 or 5.75% on a volume of 0.74 million shares. In the past 52-week period, the stock has been trading in a range of $11.76 to $18.98.