KB’s loss is triple estimate
Foreclosures in California and other Western states continued to batter sales for builder KB Home, which reported its fifth-straight quarterly loss.
The Westwood-based builder lost $256 million, or $3.30 a share, for its fiscal second quarter ended May 31. That was more than triple the average loss estimate by analysts surveyed by Bloomberg News.
Shares of KB Home sank 41 cents Friday to $17.72. The stock has fallen 55% in the last year.
In a conference call with analysts, KB Home Chief Executive Jeffrey Mezger blamed the continuing losses on the troubled housing market.
He noted that many of the company’s new developments were in California, Nevada, Arizona and Florida, where new homes must compete against deeply discounted foreclosures.
Mezger said he did not expect home prices to recover any time soon, and that the “only way to improve our margin is [to cut] costs.”
Mezger said the company was offering more modest entry-level homes, and trimming construction costs and overhead to better position itself for rising demand for housing after 2010.
He said sales prices of KB Home were down 7% in the last quarter and have fallen an additional 8% to 9% this quarter.
Jay McCanless, an FTN Midwest Securities analyst, said he had predicted a quarterly loss of $1.07 a share. KB Home’s far-greater loss was partly because of strict accounting rules that make its losses seem more severe as the value of some of its assets have dropped, he said.
McCanless, who does not own KB Home shares, said the company was paying down debt and would be acquiring land at deep discounts.
He rates the stock a “buy,” based on his expectation that demand for new homes will pick up late next year and that KB Home is “really positioning itself well for when the home [sales] volumes return.”
The company’s $256-million loss for its second quarter compares with a loss of $148.7 million, or $1.93 a share, for the same quarter a year earlier.
KB Home reported revenue of $639 million, down from $1.41 billion for the same period last year.
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