KB Home Q3 Profit Down 18%, But Results Beat View

(RTTNews) - Home builder KB Home (KBH) on Thursday reported an 18 percent decline in profit for the third quarter from last year, as strong housing revenue growth was more than offset by lower margins and higher tax expenses. However, both earnings per share and quarterly revenues topped analysts' expectations.

Jeffrey Mezger, president and chief executive officer of KB Home said, "Our third quarter results showed broad-based improvement in virtually all key operational and financial metrics across our four regions. In particular, we achieved appreciable growth in homes delivered, revenues and pretax earnings in the third quarter largely through the execution of our core strategies."

The Los Angeles, California-based company's net income for the third quarter was $23.25 million or $0.23 per share, down from $28.36 million or $0.28 per share in the prior-year quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.22 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 43 percent to $843.16 million from $589.21 million in the same quarter last year, and topped analysts' consensus estimate of $818.53 million.

The company recorded income tax expenses of $10.70 million in the quarter, up from $0.3 million in the year-ago period.

Housing revenues rose 36 percent from last year to $798.63 million, reflecting higher home deliveries as well as average selling prices. Financial services revenues declined 1 percent from last year to $2.95 million.

The company delivered 2,236 homes at an average selling price of $357,200 during the third quarter, higher than 1,793 homes delivered at an average selling price of $327,000 in the year-ago quarter.

However, housing gross margin for the quarter decreased 260 basis points to 16.2 percent from last year's 18.8 percent. As a percentage of housing revenues, selling, general and administrative expenses also increased 50 basis points from the prior-year quarter to 11.9 percent.

Company-wide net orders for the quarter increased 19 percent to 2,167 homes, with net order value up 23 percent to $773.29 million. The cancellation rate as a percentage of gross orders was 30 percent, nearly even with the year-ago quarter.

Backlog as at quarter-end totaled 4,664 homes, representing potential future housing revenues of about $1.59 billion, up 44 percent from $1.10 billion last year amid increases across all four regions.

Looking ahead, Mezger said, "Based on the progress we have made on our strategic priorities, our significantly higher backlog, and the continued improvement in housing market fundamentals, we are anticipating a strong finish to the year. Furthermore, we expect to maintain this momentum into 2016."

KBH closed Thursday's regular trading session at $14.45. In Friday's pre-market activity, the stock is down $0.05 or 0.35 percent to $14.40.