KB Home's fourth-quarter fiscal 2014 earnings of $0.27 lagged the
Zacks Consensus Estimate by 48% and declined 12.9% year over year.
Fewer-than-expected home deliveries, higher construction cost,
increased incentives and weaker margin resulted in weak earnings in
fourth quarter 2014. Total revenue of $796 million beat the Zacks
Consensus Estimate by 2.2% and increased 28.7% year over year owing
to improved pricing. The company continued to witness increase in
pricing due to shift in mix toward higher priced homes. The order
trends benefited from higher average community count and increased
emphasis on balancing home selling prices and sales pace in order
to optimize the performance of its new home communities. However,
rising input costs and a lack of geographic diversity remain
headwinds for the company. We, therefore, have a Neutral
recommendation on KB Home.
Based in Los Angeles, CA, KB Home (KBH) is a well-known
homebuilder in the United States and one of the largest in the
state. The company's revenues are generated from its Homebuilding
and Financial Services operations. The company's Homebuilding
operations (99.96% of total revenue in fiscal 2013) include
building and designing homes that cater to first time, move-up and
active adult homebuyers on acquired or developed lands. KB Home
also builds attached and detached single-family homes, town homes
Under the homebuilding business, there are four main reportable
segments based on geographical presence: West Coast (comprising
California), Southwest (comprising Arizona, Nevada and New Mexico),
Central (constituting Colorado and Texas) and Southeast (including
Florida, Maryland, North Carolina and Virginia).
KB Home's Financial Services operations (1%) offer mortgage
banking, title and insurance services to homebuyers. In Jan 2013,
KB Home formed a joint venture called Home Community Mortgage, with
its current preferred mortgage lender, National Mortgage. National
Mortgage is a subsidiary of Nationstar Mortgage Holdings Inc., one
of the largest non-bank mortgage providers in the U.S. Home
Community Mortgage started mortgage banking operations from Jul 21,
2014 until which National Mortgage was managing KB Home's mortgage
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