KB Home posts wider loss for fiscal 3Q

AP News
Posted: Sep 23, 2011 4:56 PM
KB Home posts wider loss for fiscal 3Q

KB Home on Friday became the latest major homebuilder to report a surge in new home orders for the closing months of summer and said it anticipates the sales increase will continue next year.

The company posted a wider third-quarter loss than a year earlier, however, as completed home sales tumbled 31 percent.

Orders for new homes jumped 40 percent for the quarter that ended Aug. 31. An increase in the number of KB Home developments with houses available helped, but the improvement mainly resulted from comparison with an easy year-ago sales benchmark.

Like most builders, KB saw orders slow in the second half of last year after homebuyer tax credits expired at the end of April 2010. Sales of new homes nationwide remained weak through last summer and much of the fall and, even with the incentive, new home sales in 2010 were the lowest on records going back 47 years.

That's made it easier for builders this year to show improvement. This month, Lennar Corp., Meritage Homes Corp. and The Ryland Group Inc. each touted higher summer orders.

The same government incentive also boosted builders' home deliveries and revenue last summer, and that's made those numbers tougher to beat.

In its latest quarter, KB's revenue sank 27 percent to $367.3 million, while its loss widened to $9.6 million, or 13 cents per share, from a loss of $1.4 million, or 2 cents a share, a year earlier.

Analysts polled by FactSet were expecting a larger loss of 16 cents a share but higher revenue of $390.4 million.

KB Home shares rose 19 cents, or 3.3 percent, to close Friday at $5.91.

CEO Jeffrey Mezger said that the quarter's sales trends suggest the housing market is stabilizing, but he cautioned that a full housing recovery still depends on job growth and improved consumer confidence.

The new-home market continues to be weighed down by weak consumer confidence, high unemployment, competition from foreclosures and tight mortgage-lending standards. New home sales fell in four of this year's first seven months, threatening a 2011 total even lower than 2010's.

But Mezger expects new home orders and average home sale prices in the current quarter to eclipse those of a year earlier. And he sees the company ending its fiscal year with a substantially bigger backlog of homes under contract than it had a year earlier.

Those improvements will position KB to turn a profit in its fiscal fourth quarter, the executive said. The company has posted a loss the past three quarters.

The Los Angeles company builds homes to order in 12 states and was the fifth-largest homebuilder in the nation last year, ranked by closings. It said it delivered 1,603 homes in the quarter, compared with 2,320 last year. The decline in home deliveries was partially offset by a 6 percent increase in average selling price.

KB's new home orders were particularly strong in July and August, with its California divisions posting a better than 70 percent jump from a year earlier. KB has focused much of its land acquisition and resources on California and Texas, where it sees opportunities for growth.

Even in Las Vegas, which has maintained the highest foreclosure rate in the nation throughout the housing bust, KB saw sales increase 80 percent from a year earlier.

The builder opened more than 60 communities in the first half of this year and another 33 in the third quarter, a 10 percent increase over last year.

Meanwhile, KB said it is cautiously optimistic that its South Edge LLC joint venture in Las Vegas, which has been at the center of a dispute between the builder, its partners and a group of lenders, will have a court approve its plan of reorganization in the fourth quarter or early next year.