) reported solid first-quarter fiscal 2014 results, surpassing
the Zacks Consensus Estimate on both lines due to solid revenues,
increase in housing gross profit margin, and better operating
leverage. The company's net order trends improved in the quarter
on the back of its strategy of aggressive land investments in the
D R HORTON INC (DHI): Free Stock Analysis
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TAYLOR MORRISON (TMHC): Free Stock Analysis
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KB Home's adjusted earnings of 9 cents per share in the first
quarter beat the Zacks Consensus Estimate of 8 cents by 12.5% and
improved from the year-ago loss of 16 cents per share on the back
of a solid top-line increase. The adjusted earnings exclude a
gain of $3.2 million on the sale of a joint venture in Maryland.
Total revenue of $450.7 million beat the Zacks Consensus Estimate
of $443 million by 1.7%. Revenues increased 11% from the year-ago
quarter in the first quarter of fiscal 2014 due to an increase in
In the first quarter of fiscal 2014, homebuilding revenues
increased 11.3% year over year to $448.3 million driven by
increased pricing in all the regions an improved order trends.
The number of homes delivered decreased 2.9% from the year-ago
quarter to 1,442 homes due to weak business in the West Coast
West Coast homebuilding revenues declined 12% as the region
recorded lower backlog at the beginning of the first quarter of
fiscal 2014. The rest of the three regions, Southwest, Central
and Southeast reported 45%, 18%, and 63% increases in
homebuilding revenues, respectively.
Average selling price (ASP) rose 12% year over year (representing
the 15th consecutive quarter hike) to $305,200, driven by a shift
in buyer mix to more experienced buyers who prefer larger/more
upgraded homes. Strategic community positioning to higher priced
communities also pulled up ASPs. The company's backlog totaled
2,880 homes as of Feb 28, 2014, up 4% year over year.
Potential housing revenues from backlog rose 21% to $851.6
million. At the end of the quarter, the company had 190 active
communities, up 10% from the prior-year quarter.
Net orders rose 6% in the quarter to 1,765 homes driven by an
increase in community count. The value of net orders increased
18.4% to $600.2 million.
KB Home has been witnessing soft order growth for the past few
quarters, due to lack of land and lots. The turnaround in order
growth was driven by aggressive land investments made by the
company in the past quarters. KB Home has been increased its land
acquisition and land development activities from the second half
of 2012. The homebuilding company mainly focused on high-end
locations, which drove community count and order growth. The
company spent $1.14 billion in land investment in fiscal 2013,
significantly more than $564.9 million spent in 2012. The company
continued its land investments and spent $354.3 million in the
first quarter of fiscal 2014.
Adjusted housing gross profit increased 28.3% to $78.5 million in
the quarter. Adjusted homebuilding gross margin improved 260
basis points (bps) in the quarter to 17.8%, driven by price
increases and a favorable community mix.
The selling, general & administrative (SG&A) expense
ratio improved 80 bps year over year to 13.9% in the quarter due
to the company's cost reduction initiatives and increased
Other Stocks to Consider
KB Home carries a Zacks Rank #3 (Hold). Investors interested in
the homebuilding sector can also consider stocks like
William Lyon Homes
Taylor Morrison Home Corporation
DR Horton Inc.
). While William Lyon Homes and Taylor Morrison Home Corp. sport
a Zacks Rank #1 (Strong Buy), DR Horton carries a Zacks Rank #2