) second quarter fiscal 2013 adjusted earnings (excluding water
intrusion-related charge) of 16 cents, is a huge
improvement over the year-ago adjusted loss of 31 cents per
share. The company's reported loss of 4 cents per share was
narrower than the Zacks Consensus Estimate of a loss of 5 cents
Results improved year over year on the back of higher
homebuilding revenues, improved housing gross margins and reduced
selling, general and administrative (SG&A) expense ratio.
In addition to the strengthening housing market, KB Home's
strategic growth initiatives helped drive revenues and
profitability in the quarter. The company gained from
repositioning of land investments to highly sought-after land
Total revenue increased 73% from the year-ago quarter to $524.4
million in the second quarter of 2013, driven by higher housing
revenues due to improved market conditions. Total revenue
crushed Zacks Consensus Estimate of $426 million by 23.1%.
In the second quarter of 2013, housing revenues increased 73.6%
year over year to $521.8 million, driven by increased pricing,
double-digit increase in number of homes delivered and robust net
order growth. The number of homes delivered increased 39% from
the year-ago quarter to 1,797 homes.
Despite a 3% dip in community count, net orders increased 6% in
the quarter to 2,162 homes. The increase in net order value was
driven by an 8% rise in the Central region and 31% rise in the
Southeast region, partially dragged by weak net orders in the
West and Southwest.
The value of net orders grew 27% to $639.6 million, driven by
a solid increase in net order value in all the regions. Increase
in net order value varied across regions, from a 10% increase in
the Southwest region to a 46% increase in the Southeast.
D R HORTON INC (DHI): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
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RYLAND GRP INC (RYL): Free Stock Analysis
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Average selling price rose 25% year over year to $290,400, driven
by gradually rising home prices and the company's shift in focus
toward homebuyers in highly-desirable, land-constrained
submarkets. The Southwest region recorded the maximum price hike
of 26%, followed by an increase of 16% in the Southeast region.
Prices increased 15% each in both West Coast and Central regions.
ASP improved sequentially for the twelfth consecutive quarter.
The company's backlog totaled 3,128 homes as of May 31, 2013, up
6% from 2,962 homes as of May 31, 2012. Potential housing
revenues from backlog rose 19% to $826.6 million from $693.4
million in the year-ago quarter. As a percentage of gross orders,
the company's cancellation rate was 27%, up from 26% in the
second quarter of 2012.
In the quarter, the company intensified its land acquisition and
development activities, spending $230 million on such activities.
Adjusted homebuilding gross margin improved 610 basis points
(bps) in the quarter to 18.2%, driven by price increases,
favorable community mix and cost control initiatives. Moreover,
gross margins improved 300 bps sequentially. Adjusted operating
income is $24.6 million in the quarter.
The SG&A expense ratio improved 760 bps year over year to
13.4% in the quarter due to the company's cost reduction
initiatives and increase in revenues.
Financial Services Revenues and Income
Financial Services revenues (included in total revenue) were $2.6
million, up 13%. Pretax income of the business improved 33% to
$2.0 million in the second quarter of 2013.
Outlook for Fiscal 2013
KB Home expects improved profitability for full year 2013 on the
back of its strategic growth plans and strong housing
fundamentals. Its strong land position, significant financial
flexibility, increased community count, rising ASPs, higher
deliveries and backlog position will help it to achieve its goals
in 2013. Top line growth is also expected to accelerate.
KB Home intends to open more than 120 communities in 2013. The
company expects its land investment to exceed $1.2 billion for
fiscal 2013, up from the prior guidance of $1 billion, which will
further boost top-line growth.
KB Home carries a Zacks Rank #3 (Hold).
Other stocks in the homebuilding sector that are performing well
and deserve a mention include
D. R. Horton Inc.
Ryland Group Inc.
), all carrying a Zacks Rank #1 (Strong Buy).