KB Home posts profit for quarter, tops Street view

Friday, January 7th, 2011 | Finance News

LOS ANGELES – KB Home surprised Wall Street with a profit for the fiscal fourth quarter, despite delivering fewer homes.

Its stock gained 77 cents, or 5.4 percent, to $15.10 in premarket trading on Friday.

KB Home earned $17.4 million, or 23 cents per share, for the three months ended Nov. 30, helped by lower expenses. That's down 83 percent from a profit of $100.7 million, or $1.31 per share, a year earlier, when KB Home benefited from a $191.7 million tax benefit.

Analysts surveyed by FactSet expected a loss of 19 cents per share.

The homebuilder's revenue dropped to $451 million from $674.6 million, but topped Wall Street's $446.4 million.

Housing revenue declined 28 percent, while land sale revenue slid to $1.9 million from $52.7 million.

KB Home delivered 37 percent fewer homes, but that was partly offset by a 14 percent increase in the average selling price. The Los Angeles company delivered 1,918 homes at an average selling price of $232,500 during the quarter.

Fourth-quarter net orders slipped 25 percent to 1,085, while the cancellation rate rose to 29 percent from 17 percent in the prior-year period. The company's backlog fell 37 percent to 1,336.

KB Home builds homes to order for entry level, move-up buyers and seniors in 12 states.

Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

High unemployment, tighter bank lending standards and uncertainty about home prices have kept people from buying homes. Government tax credits propped up sales last spring, but demand weakened after the incentive expired in April.

While President and CEO Jeffrey Mezger said in a statement that unemployment woes and shaky consumer confidence will likely continue to weigh on the housing market, he was optimistic that KB Home's improved financials and strong balance sheet would help it weather the conditions.

Like other builders, KB Home is already looking ahead to the spring, traditionally the strong selling season for homes.

The builder has cut costs while it moved to open up new communities. It projects it will increase its slate of open communities by 25 percent this year, mostly on new acquisitions and some reopened developments.

For the year, KB Home lost $69.4 million, or 90 cents per share. This compares with a loss of $101.8 million, or $1.33 per share, a year earlier. Revenue for the year fell 13 percent to $1.59 billion.