One of the leading homebuilding companies in the U.S.,
) announced preliminary quarter-to-date (QTD) net order for new
homes for first quarter 2013. The number of new homes ordered was
750 as of Jan 18, 2013, up 54% from 488 in the year-ago period.
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The company has been delivering solid year-over-year order growth
during the past few quarters. The strong order results of the
company have been driven by the housing market recovery. The
rising demand for new homes has led to a favorable situation in
the housing market, where inventory levels are dropping and
prices are moving up.
The increase in order for new homes has also been driven by KB
Home's strategic initiatives. The company has made a huge
investment of $350 million in land and land development in order
to cater to the increasing demand for new homes. Also, the
company seeks to place the communities in highly desirable
land-constrained submarkets. This strategy will enable the
company to sell larger, higher-priced homes, thus driving a
strong increase in average selling price. The other strategies
included activating communities, which were held for future
development, increasing revenues per community, and strengthening
management teams with additional resources.
KB Home recently acquired land and lots in two communities in
northeast San Antonio, 65 lots in Fuquay-Varina, southwest of
Raleigh, North Carolina, and 45 finished lots and 160 undeveloped
lands in Copperfield community in Converse, one of the fastest
growing communities in Northeast Bexar County.
All of these initiatives propelled the robust order growth
achieved by the company. However, order growth is expected to
moderate in the upcoming quarters as the housing market
KB Home intends to open more than 120 communities in 2013, with
more communities slated for the later half of the year. As such,
the community count is expected to increase by at least 15% to
20% by the end of next year. The company expects profitability
for fiscal 2013.
We are positive about KB Home's aggressive investment in land
assets and communities. Acquiring lots and lands will help the
company to capitalize on the increasing housing demand. However,
we believe that it may take time to achieve sustainable
profitability as the housing market recovery process is erratic
KB Home carries a Zacks Rank #3 (Hold). Some other Zacks Rank #1
(Strong Buy) homebuilding companies that warrant a look include
Meritage Homes Corporation
MDC Holdings Inc.