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KB Home (KBH) Q1 Earnings & Revenues Beat, Margins Down
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KB Home (KBH - Free Report) reported better-than-expected results in first-quarter fiscal 2024 (ended Feb 29, 2024). Both earnings and revenues beat the Zacks Consensus Estimate and rose on a year-over-year basis.
Shares of this leading homebuilder gained 1.1% in the after-market trading session on Mar 20.
Looking forward to the second quarter and full-year 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Earnings & Revenue Discussion
KBH reported adjusted earnings per share of $1.76, which beat the consensus estimate of $1.56 by 12.8% and increased 21% from the year-ago quarter’s $1.45. The upside was mainly backed by the favorable impact of repurchases over the past several quarters.
Total revenues of $1.47 billion beat the consensus mark of $1.45 billion by 1.2% and increased 6% on a year-over-year basis.
Segment Details
Homebuilding: The segment's revenues of $1.46 billion increased 6% from the prior-year quarter’s level. The number of homes delivered was 3,037 units, up 9% from the year-ago period’s level. However, the average selling price, or ASP, declined 2.9% from a year ago to $480,100.
The most notable observation in the quarter was the order growth rate. Net orders grew 55% to 3,323 units from the prior year. The value of net orders was up 58% from the year-ago quarter to $1.58 billion, depicting improved demand conditions and a lower cancelation rate compared with the year-ago period. Absorption or monthly net orders per community increased to 4.6 from 2.8.
The cancelation rate, as a percentage of gross orders, was 14% compared with 36% in the year-ago period.
Quarter-end backlog totaled 5,796 homes, down from the year-ago figure of 7,016 units. Further, potential housing revenues from backlog declined 15.8% from the prior-year period to $2.79 billion.
The average community count was down 4% to 240 and the ending community count declined 7% from the year-ago period to 238.
Within homebuilding, the housing gross margin (excluding inventory-related charges) declined 20 basis points (bps) year over year to 21.6%.
Selling, general and administrative expenses (SG&A) — as a percentage of housing revenues — increased 70 bps from the year-ago figure to 10.8%, reflecting higher marketing, advertising and other expenses. Homebuilding’s operating margin (excluding inventory-related charges) was down 80 bps to 11.7%.
Financial Services: The segment's revenues rose 5% year over year to $6.07 million. Pretax income was $11.6 million, up from $6 million reported a year ago.
Financial Position
KB Home had cash and cash equivalents of $668.1 million as of Feb 29, 2024, down from $727.1 million reported at the end of 2023. The company had a total liquidity of $1.75 billion, including $1.08 billion of available capacity under the unsecured revolving credit facility. Notably, no cash borrowings were outstanding under the revolver on Feb 29, 2024.
As of the end of the fiscal first quarter, the debt-to-capital ratio was 30.4%, down from 30.7% at the end of 2023.
In the fiscal first quarter, it repurchased approximately 0.83 million shares of its outstanding common stock for $50 million. In fiscal 2023, KBH repurchased 9.2 million shares for $411.4 million. As of Feb 29, 2024, it had $113.6 million stock remaining under the repurchase authorization.
Fiscal 2024 Guidance
For the full year, it anticipates housing revenues between $6.50 billion and $6.90 billion (versus $6.40-$6.80 billion expected earlier), up from the fiscal 2023 level of $6.37 billion. ASP is estimated in the range of $480,000-$490,000, up from $481,300 reported a year ago (taking the midpoint of the guided range).
Homebuilding’s operating margin (assuming no inventory-related charges) is expected in the band of 10.9-11.3%. In fiscal 2023, it was 11.3%.
Assuming no inventory-related charges, KB Home expects the housing gross margin between 21% and 21.4%, down from 21.4% reported a year ago.
SG&A expenses, as a percentage of housing revenues, are likely to be 10.2%. It projects an effective tax rate of approximately 23%. The company expects the average community count to increase 7% and the ending community count to be roughly 260.
Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate, but revenues missed the same. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
Investors’ sentiments might have been hurt by lower-than-expected revenues in the quarter as well as flat gross margin expectations and higher selling, general and administrative guidance for the second quarter of fiscal 2024.
Toll Brothers, Inc. (TOL - Free Report) reported solid results for first-quarter fiscal 2024 (ended Jan 31, 2024), wherein its top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Since mid-January, TOL has experienced a notable surge in demand coinciding with the onset of the spring selling season. Buoyed by a robust job market, improving consumer confidence, and sustained low levels of resale inventory, the company maintained an optimistic outlook for strong demand in the new homes market throughout 2024.
MasTec, Inc. (MTZ - Free Report) reported impressive results in fourth-quarter 2023, with earnings and revenues beating the Zacks Consensus Estimate. Earnings declined on a year-over-year basis, but revenues increased on the back of strong contributions from the Oil and Gas segment.
MTZ's fourth-quarter results aligned with its expectations following a challenging 2023. The company is poised to capitalize on the opportunities and aims to achieve record levels of revenues and adjusted EBITDA in 2024. The robust demand for MTZ's services suggests the potential for double-digit revenues and earnings growth in 2025 and beyond.
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KB Home (KBH) Q1 Earnings & Revenues Beat, Margins Down
KB Home (KBH - Free Report) reported better-than-expected results in first-quarter fiscal 2024 (ended Feb 29, 2024). Both earnings and revenues beat the Zacks Consensus Estimate and rose on a year-over-year basis.
Shares of this leading homebuilder gained 1.1% in the after-market trading session on Mar 20.
Looking forward to the second quarter and full-year 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Earnings & Revenue Discussion
KBH reported adjusted earnings per share of $1.76, which beat the consensus estimate of $1.56 by 12.8% and increased 21% from the year-ago quarter’s $1.45. The upside was mainly backed by the favorable impact of repurchases over the past several quarters.
KB Home Price, Consensus and EPS Surprise
KB Home price-consensus-eps-surprise-chart | KB Home Quote
Total revenues of $1.47 billion beat the consensus mark of $1.45 billion by 1.2% and increased 6% on a year-over-year basis.
Segment Details
Homebuilding: The segment's revenues of $1.46 billion increased 6% from the prior-year quarter’s level. The number of homes delivered was 3,037 units, up 9% from the year-ago period’s level. However, the average selling price, or ASP, declined 2.9% from a year ago to $480,100.
The most notable observation in the quarter was the order growth rate. Net orders grew 55% to 3,323 units from the prior year. The value of net orders was up 58% from the year-ago quarter to $1.58 billion, depicting improved demand conditions and a lower cancelation rate compared with the year-ago period. Absorption or monthly net orders per community increased to 4.6 from 2.8.
The cancelation rate, as a percentage of gross orders, was 14% compared with 36% in the year-ago period.
Quarter-end backlog totaled 5,796 homes, down from the year-ago figure of 7,016 units. Further, potential housing revenues from backlog declined 15.8% from the prior-year period to $2.79 billion.
The average community count was down 4% to 240 and the ending community count declined 7% from the year-ago period to 238.
Within homebuilding, the housing gross margin (excluding inventory-related charges) declined 20 basis points (bps) year over year to 21.6%.
Selling, general and administrative expenses (SG&A) — as a percentage of housing revenues — increased 70 bps from the year-ago figure to 10.8%, reflecting higher marketing, advertising and other expenses. Homebuilding’s operating margin (excluding inventory-related charges) was down 80 bps to 11.7%.
Financial Services: The segment's revenues rose 5% year over year to $6.07 million. Pretax income was $11.6 million, up from $6 million reported a year ago.
Financial Position
KB Home had cash and cash equivalents of $668.1 million as of Feb 29, 2024, down from $727.1 million reported at the end of 2023. The company had a total liquidity of $1.75 billion, including $1.08 billion of available capacity under the unsecured revolving credit facility. Notably, no cash borrowings were outstanding under the revolver on Feb 29, 2024.
As of the end of the fiscal first quarter, the debt-to-capital ratio was 30.4%, down from 30.7% at the end of 2023.
In the fiscal first quarter, it repurchased approximately 0.83 million shares of its outstanding common stock for $50 million. In fiscal 2023, KBH repurchased 9.2 million shares for $411.4 million. As of Feb 29, 2024, it had $113.6 million stock remaining under the repurchase authorization.
Fiscal 2024 Guidance
For the full year, it anticipates housing revenues between $6.50 billion and $6.90 billion (versus $6.40-$6.80 billion expected earlier), up from the fiscal 2023 level of $6.37 billion. ASP is estimated in the range of $480,000-$490,000, up from $481,300 reported a year ago (taking the midpoint of the guided range).
Homebuilding’s operating margin (assuming no inventory-related charges) is expected in the band of 10.9-11.3%. In fiscal 2023, it was 11.3%.
Assuming no inventory-related charges, KB Home expects the housing gross margin between 21% and 21.4%, down from 21.4% reported a year ago.
SG&A expenses, as a percentage of housing revenues, are likely to be 10.2%. It projects an effective tax rate of approximately 23%. The company expects the average community count to increase 7% and the ending community count to be roughly 260.
Zacks Rank
KB Home currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Construction Releases
Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate, but revenues missed the same. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
Investors’ sentiments might have been hurt by lower-than-expected revenues in the quarter as well as flat gross margin expectations and higher selling, general and administrative guidance for the second quarter of fiscal 2024.
Toll Brothers, Inc. (TOL - Free Report) reported solid results for first-quarter fiscal 2024 (ended Jan 31, 2024), wherein its top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Since mid-January, TOL has experienced a notable surge in demand coinciding with the onset of the spring selling season. Buoyed by a robust job market, improving consumer confidence, and sustained low levels of resale inventory, the company maintained an optimistic outlook for strong demand in the new homes market throughout 2024.
MasTec, Inc. (MTZ - Free Report) reported impressive results in fourth-quarter 2023, with earnings and revenues beating the Zacks Consensus Estimate. Earnings declined on a year-over-year basis, but revenues increased on the back of strong contributions from the Oil and Gas segment.
MTZ's fourth-quarter results aligned with its expectations following a challenging 2023. The company is poised to capitalize on the opportunities and aims to achieve record levels of revenues and adjusted EBITDA in 2024. The robust demand for MTZ's services suggests the potential for double-digit revenues and earnings growth in 2025 and beyond.