KB Home (KBH) shares are weak today after the company reported weaker-than-expected net order numbers for the fourth quarter 2009. Quarterly earnings, on the other hand, came in much better than expected, helped in large part by revenue from land sales.
KBH has revealed a net income of $100.7 million or $1.31 per share in the fourth quarter of fiscal 2009 ended November 30, 2009, in sharp contrast to a net loss of $307.3 million or $3.96 per share in the fourth quarter of the prior fiscal year. The profit is even more surprising compared to the Zacks Consensus Estimate of a loss of 51 cents per share for KBH. The improvement in profit was attributable to higher land sale revenues.
Revenue dipped 27% to $674.6 million during the quarter due to lower housing revenues, partly offset by higher land sale revenues. Housing revenues fell 32% to $618.7 million, while land sale revenues rose to $52.7 million from $7.1 million.
The year-over-year decline in housing revenues reflected a 22% decrease in the number of homes delivered to 3,042 homes and a 12% decrease in the average selling price to $203,400. Meanwhile, net orders for KBH increased 12% to 1,446 homes, primarily an outcome of the company’s lower cancellation rate.
The Financial Services operations, which include KB Home’s equity interest in an unconsolidated mortgage banking joint venture, reported a pretax income of $7.5 million in the quarter, compared to a pretax income of $6.9 million in the fourth quarter a year ago.
Annual Results
KB Home posted a narrower loss of $101.8 million or $1.33 per share in fiscal 2009 compared to a net loss of $976.1 million or $12.59 per share in fiscal 2008 and to the Zacks Consensus Estimate of a loss of $2.02 per share.
Revenue plummeted 40% to $3.03 billion in the reported fiscal year. The decrease was attributable to lower housing revenues, which fell 40% to $1.76 billion. The number of homes delivered shrank 32% to 8,488, while the average selling price declined 12% to $207,100.
Financial Position
KB Home had cash and cash equivalents of $1.3 billion as of November 30, 2009. Total debt amounted to $1.8 billion as of that date. The debt to capitalization ratio stood at 72%.
Based in Los Angeles, California, KB Home 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 through a joint venture, KB Home Loans. In addition, the company, through its subsidiary, KB Home Mortgage Company, provides title and insurance services to its homebuyers.
Shares of KBH have been under pressure today. The stock price declined about 5.5% to around $15.40 from $16.38 after the market closed yesterday. The market appears to be discounting the better-than-expected earnings and focusing instead on management’s weak outlook, changes in federal government monetary and fiscal policies and programs and by the impact of rising foreclosures and mortgage loan delinquencies.
We recommend KBH shares as Neutral.
Read the full analyst report on “KBH”
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