Shares of KB Home Fall on Earnings Confusion

The stock of KB Home fell 8% Friday as analysts tried to sort out the earnings outlook for the L.A.-based home builder.

KB Home on Thursday reported a 27% increase in its fiscal second-quarter earnings. But Wall Street analysts appeared uncertain about the guidance the company gave for its full-year profit prospects.

Margaret Whelan, an analyst with UBS Investment Securities, said in a report issued early Friday that she believed KB Home was being “overly conservative” when it raised its guidance for full-year earnings per share to $8.20 from $8.

“We believe these concerns stem from the possibility that recently booked orders may not be delivered by the end of [KB Home’s] November fiscal year,” she wrote. Using what she termed “more aggressive” assumptions, Whelan estimated the firm’s fiscal 2003 earnings at $8.75 a share.

Other analysts also said there was some confusion about just how strong the company thinks its earnings will be this year, and that helped push KB Home’s stock down $5.70 to $64.25 on the New York Stock Exchange.

KB Home Chief Financial Officer Dom Cecere acknowledged Friday that the company was being cautious because some of the orders for new homes now on its books may not be completed until December, the start of its next fiscal year.

“We decided to raise our guidance but said we wanted to wait and see another three months to make sure the orders we just received in the second quarter don’t slip into 2004,” Cecere said. “If we were too buoyant we’d be taken to task for being overly optimistic.”