) first quarter 2013 adjusted loss (excluding income tax benefit)
of 16 cents per share was 30.4% narrower than the Zacks Consensus
Estimate of 23 cents loss per share.
The loss was also significantly narrower than the year-ago loss
of 51 cents per share riding on higher homebuilding revenues,
improved housing gross margin and reduced SG&A ratio.
Total revenue increased 59% from the year-ago quarter to $405.2
million in the first quarter of 2013, driven by higher number of
homes closed and hike in average selling prices. Total revenue
also beat the Zacks Consensus Estimate of $344 million by 17.8%.
The top line quarterly results benefited from management's
strategy to focus on highly sought-after land constrained housing
markets. The company offered larger homes to first time and move
up buyers, which helped in raising the average selling prices
In the first quarter of 2013, housing revenues increased 59.9%
year over year to $402.8 million, largely driven by an increase
in selling prices and number of homes delivered.
Financial Services revenues (included in total revenue) were $2.4
million, down 11.1% from the prior-year quarter.
Despite an 11% dip in community count, net orders increased 40%
in the quarter to 1,671 homes, driven by double-digit increase in
all the regions. The value of net orders grew 83% to $506.8
million, driven by high double-digit increase in net order value
in all the regions. Increase in net order value varied across
regions, from 41% in Central region to 133% in West Coast
The average selling price rose 24% year over year to $271,300,
driven by company's shift in focus toward first-time and first
move-up homebuyers in higher priced communities, where prices are
consistently rising. The Southwest region recorded the maximum
price hike of 22.4%, followed by an increase of 18.9% in the West
Coast region, 16.4% in the Southeast region and 13.2% in the
The number of homes delivered increased 29% from the year-ago
quarter to 1,485 homes, driven by strong performance in West
Coast, Southeast and Central homebuilding regions. The number of
homes delivered grew 64.7% in the West Coast region, 44.0% in the
Southeast region and 17.2% in the Central region.
The company's backlog totaled 2,763 homes as of Feb 28, 2013, up
25% from 2,203 homes as of Feb 29, 2012. Potential housing
revenues from backlog rose 53% to $703.9 million from $460.0
million in the year-ago quarter.
As a percentage of gross orders, the company's cancellation
rate improved 400 basis points year over year to 32% in the first
quarter of 2013.
Adjusted homebuilding gross margin improved 420 basis points
(bps) in the quarter to 14.8%. Operating margin improved 12.5%
year over year driven by higher housing gross profits and
The SG&A expense ratio improved 570 bps year over year to
14.7% in the quarter due to the company's cost reduction
initiatives, increases in volumes and average selling prices.
KB Home believes that the housing recovery is gaining momentum
and the company expects profitability for full year 2013.
KB Home maintained its guidance to open more communities in 2013.
It hopes to open more than 120 communities in 2013. It expects to
grow its community count sequentially in each quarter in 2013. As
such, community count is expected to increase 15%. The company
expects its land investment to exceed $1 billion for fiscal 2013.
Gross margin is expected to improve sequentially from the second
quarter and thereafter improve in the subsequent quarters in
KB Home carries a Zacks Rank #3 (Hold).
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Other stocks in the homebuilding sector that are performing well
and deserve a mention include
), carrying a Zacks Rank #1 (Strong Buy), and
D. R. Horton Inc.
Hovnanian Enterprises Inc.
), carrying a Zacks Rank #2 (Buy).