KB Home’s Earnings Climb 78%
KB Home on Thursday reported a better-than-expected 78% jump in quarterly profit on strong sales and higher prices, and raised its earnings outlook for the remainder of the year.
Shares of the Los Angeles-based home builder surged 7% in after-hours trading. The results were released after the market closed.
The company, among the largest home builders in California and the nation, said fiscal second-quarter net income was $181.5 million, or $2.06 a share, compared with $102.1 million, or $1.20, a year earlier.
Analysts polled by Thomson First Call had expected per-share earnings of $1.78.
Revenue rose 36% to $2.1 billion in the period ended May 31.
Builders such as KB Home have seen their top and bottom lines swell on the strength of the nation’s long-booming housing market. During the quarter, results were further helped as mortgage rates continued to decline, spurring more buyers to purchase homes.
That higher demand pushed KB Home’s net orders to a record in the quarter, rising 15% from a year earlier to 12,290. The company delivered 8,535 units, a 20% jump, and its backlog of completed homes climbed 31% to 27,089 units.
“Housing demand in our major markets during the second quarter continued to outstrip supply, producing the highest number of net new orders for any single quarterly period,” KB Home Chief Executive Bruce Karatz said.
Escalating home price appreciation in most parts of the U.S. helped KB Home raise prices on its houses. Its average selling price increased 14% to $247,800 from a year earlier. On the West Coast, its average was $450,100, a 13% increase and close to California’s median home price.
All the positive developments prompted KB Home to raise its earnings guidance for 2005 to $9 a share, up from a previous forecast of $7.88 and a 58% increase over its 2004 earnings per share of $5.70.
“I think the consensus out there was that most firms in the industry would probably beat earnings and raise guidance. The question was by how much,” said Stephen East, an analyst at Susquehanna Financial Group in Bala Cynwyd, Pa.
KB Home, he said, “moved it forward considerably.”
Once primarily a builder of entry-level homes in California, KB Home now has less than 20% of its business within the state. Since 2002, the company has aggressively diversified into high-growth regions, including Florida and the Southwest. The company also is among the largest builders in France.
KB Home’s stock price is about eight times its level five years ago, after adjusting for a stock split. On Thursday, its shares rose $1.29, or 1.8%, to $72.25. After hours, the stock reached as high as $77.17.
