KB Home shares soar as earnings top expectations

KB Home
KB Home, which is based in Los Angeles, is one of the nation’s largest home builders. Above, one of its homes under construction in Balch Spring, Texas, in 2011.
(LM Otero / Associated Press)

Shares of KB Home soared Friday after the Los Angeles home builder reported first-quarter earnings that beat Wall Street expectations.

The company, one of the nation’s largest home builders, said revenue for the quarter ended Feb. 28 hit $580.1 million. That was up 29% compared with the same period a year earlier, as the firm sold more homes at higher prices.

Net income was $7.8 million, or 8 cents a share, compared with $10.6 million, or 12 cents, a year earlier. Profit took a hit from higher land and construction costs, including those associated with opening new communities, KB said.

Wall Street expected worse. Analysts forecasted earnings of 2 cents a share on revenue of $476.5 million, according to FactSet Research Systems Inc.


The better-than-expected results sent KB shares up $1.18, or 8.4%, to $15.26.

Although home sales in Southern California have been sluggish in the last year — in large part because of the higher cost of housing — market watchers say the combination of more homes on the market and an improving economy may spur a spring rebound.

KB Home is already seeing one. Chief Executive Jeffrey Mezger said there was more demand from would-be home buyers in the first quarter than a year earlier. The company sold nearly 20% more homes in California last quarter, at an average price of $550,600 — about 5% higher than a year earlier.

Across all its regions — California, Southwest, Central and Southeast — the average sales price rose nearly 8% and sales jumped 10.5%.


Would-be buyers are coming back into the market after experiencing “sticker shock,” Mezger said in an interview.

“We have a consumer that is feeling pretty good in an economy that is getting better,” he said.

In addition to improved interest, an expanded community count boosted sales, Mezger said. KB Home now has 25% more actively selling communities than it had a year earlier. That expansion will enable the Westwood firm to benefit from an improving housing market during the busy spring buying season, Mezger said.

“To have all these new communities at the best time of the year is a real nice combination,” he said.

Twitter: @khouriandrew

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