KB Home Earnings Rise 42%

KB Home, the fifth-largest U.S. home builder by market value, said Wednesday that its fiscal first-quarter earnings jumped 42% but that orders fell as rising mortgage rates cooled the housing market.

Net income in the three months ended Feb. 28 increased to $174.5 million, or $2.02 a share, from $122.7 million, or $1.41, a year earlier.

Orders fell 12%, the Westwood-based company said. In the year-earlier quarter, KB Home posted a 23% gain in orders.

Analysts had expected earnings of $1.96 a share, according to a survey by Thomson Financial. KB Home has exceeded analysts’ estimates by an average of 7.8% in the last five quarters.

Home builders including KB Home and industry leader D.R. Horton Inc. are posting profit gains on sales made before a jump in mortgage rates. Analysts are expecting house sales to fall this year as price growth ebbs. Still, KB Home sold a record number of homes in the quarter.

“It’s a market that long term is going to stabilize at a high level,” said Lawrence Horan, an analyst at Janney Montgomery Scott.

The decline in net orders, the first since the second quarter of 2002, was driven by cancellations, KB Home Chief Executive Bruce Karatz said.

“Some housing markets have moderated from the overheated and, in some cases, speculative pace of growth of the past few years,” Karatz said. “Tempering of demand to more sustainable long-term levels is a healthy trend.”

The earnings report was released after the stock market closed. KB Home shares had risen 34 cents to $64.59 in regular trading. They climbed to $65.99 after hours.

The shares had declined 11% this year, compared with a drop of 6.6% in a Standard & Poor’s index of 16 home builders.