KB Home (KBH) posted a narrower loss of $38 million or 49 cents per share in the first quarter of fiscal 2011 compared with $54.7 million or 71 cents per share in the year-ago quarter. However, the loss was broader than the Zacks Consensus Estimate of a loss of 27 cents per share for the quarter.
The loss in the quarter excluded joint venture impairment charge of $53.7 million and a loss on loan guaranty of $22.8 million related to the company’s investment in South Edge, LLC.
Total revenues fell 25% to $196.9 million, mainly driven by a 26% decline in housing revenues to $195.3 million. The increase in housing revenues reflected a 28% decrease in the number of homes delivered to 949 homes, partly offset by a 4% rise in average selling price to $205,700.
The price increases of 1%, 7% and 26% in the company’s West Coast, Central and Southeast regions, respectively, partly offset by a 6% decrease in the Southwest region, led to the overall increase in average prices. The company’s land sale revenues slashed 78% to $78,000.
Meanwhile, net orders went down 32% to 1,302 homes from 1,913 homes a year ago. As a percentage of beginning backlog, the company’s cancellation rate was 39% in the quarter compared with 26% in the prior year period.
As of February 28, 2011, the company’s backlog totaled 1,689 homes, a 38% decline from 2,713 homes in backlog in the corresponding period of 2010. Potential future housing revenues in backlog fell 32% to $353.6 million as of February 28, 2011 from $523.8 million as of February 28, 2010, primarily due to the lower number of homes in backlog.
The company’s homebuilding business (including housing and land) posted an operating loss of $47.9 million in the quarter compared with $36.2 million in the first quarter of fiscal 2010.
The housing gross margin (excluding inventory impairment and land option contract abandonment charges) was 12.6% versus 13.7% in the year-ago quarter. Land business produced break-even results in the first quarters of 2011 and 2010.
Selling, general and administrative (SG&A) expenses dipped 31% to $49.6 million from $72.2 million in the year-ago period. This was attributable to lower volume of homes delivered, streamlining measures, and a significant reduction in certain legal and long-term compensation costs compared with the year-earlier quarter. As a percentage of housing revenues, the company’s SG&A expenses improved to 25.4% from 27.5% in the 2010 quarter.
The Financial Services business, which include the KB Home’s equity interest in an unconsolidated mortgage banking joint venture, recorded a 12% rise in revenues to $1.6 million. The segment reported a decline in pretax income of $625,000 in the quarter versus $1.9 million in the year-earlier quarter due to lower equity in income of unconsolidated joint venture.
KB Home had cash and cash equivalents of $735.8 million and total debt of $1.7 billion as of February 28, 2011. The debt-to-capitalization ratio worsened to 77% in the same period from 74% as of November 30, 2009.
KB Home, a Zacks#3 Rank (Hold) stock, is based in Los Angeles, California. The company builds various types of homes, including attached and detached single-family homes, town homes and condominiums, designed primarily for first-time, first move-up, and adult buyers. It also offers mortgage services in a joint venture with Countrywide KB Home Loans. In addition, the company, through its subsidiary, KB Home Mortgage Company, provides title and insurance services to its homebuyers.
Both of its competitors, D.R. Horton Inc. (DHI), and PulteGroup Inc. (PHM) witnessed deterioration in earnings in the most recent quarter.
D.R. Horton depicted a loss of $12 million or 4 cents per share (excluding special items) in the first quarter of fiscal 2011 compared with a profit of $42.8 million or 12 cents per share (excluding special items) in the same quarter of fiscal 2010.On the other hand, PulteGroup showed a wider loss of $165 million or 44 cents per share in the fourth quarter of 2010 compared with $117 million or 31 cents per share in the same quarter of 2010.
D R HORTON INC (DHI): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis Report
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