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Why Is KB Home (KBH) Up 24.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for KB Home (KBH - Free Report) . Shares have added about 24.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is KB Home due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
KB Home (KBH - Free Report) Q4 Earnings & Revenues Top, Net Orders Up 42%
KB Home ended fiscal 2020 on an impressive note, with fourth-quarter fiscal 2020 revenues and earnings beating analysts’ expectations. Owing to solid housing net orders, the company expects to achieve notable growth in revenues and earnings for fiscal 2021.
Earnings & Revenue Discussion
KB Home reported quarterly earnings of $1.12 per share, which surpassed the consensus estimate of 87 cents by 28.7%. However, the metric declined 14.5% from the year-ago figure of $1.31 per share.
Total revenues of $1,194.3 million topped the consensus mark of $1,106 million by 8% but fell 23.4% on year-over-year basis due to COVID-19 impacts.
Segment Details
Homebuilding: For the quarter under review, the segment's revenues of $1,189.9 million decreased 23.4% from the prior-year period.
Number of homes delivered declined 26.8% from the year-ago level to 2,876 units. Average selling price or ASP, however, grew 5% from a year ago to $413,700.
Net orders increased 42% from the prior-year quarter to 3,937 homes, marking the highest fourth-quarter level since 2005. Value of net orders also rose 50% from the year-ago quarter to $1.58 billion.
For the reported quarter, average community count was down 8% from a year ago to 234. Quarter-end community count was 236, down 6% from the prior year. Net orders per community averaged 5.6 per month compared with 3.7 a year ago.
Cancellation rate, as a percentage of gross orders, improved to 14% from 22% reported a year ago. Its quarter-end backlog totaled 7,810 homes (as of Nov 30, 2020), up 54% from a year ago. Potential housing revenues from backlog also grew 63% from the prior-year period to $2.96 billion. This marked the highest fourth quarter-end backlog (in terms of both homes and value) since 2005.
Margins
Within homebuilding, housing gross margin (excluding inventory-related charges) improved 110 basis points (bps) year over year to 21%. The increase was attributed to a favorable pricing environment due to robust housing market demand, a mix shift of homes delivered and lower amortization of previously capitalized interest.
As a percentage of housing revenues, selling, general and administrative expenses increased 120 bps from the year-ago figure to 10.3% due to decreased operating leverage on account of lower housing revenues.
Financial Services revenues fell 18.1% year over year to $4,364 million. Pretax income of $9.5 million was up from $9.3 million a year ago, mainly reflecting higher income from its mortgage banking joint venture, KBHS Home Loans, LLC.
Financial Position
KB Home had cash and cash equivalents of $681.2 million as of Nov 30, 2020, significantly up from $453.8 million on Nov 30, 2019. The company had total liquidity of $1.47 billion, including $787.6 million of available capacity under the unsecured revolving credit facility. Inventories marginally increased to $3.9 billion at fiscal 2020-end from $3.7 billion as of Nov 30, 2019. Its debt to capital was 39.6% at year-end, which improved 270 bps from Nov 30, 2019. Net debt to capital was 28.6% at fiscal 2020-end, which improved 660 bps.
Fiscal 2020 Highlights
Earnings came in at $3.13 per share for the full year, reflecting an increase of 9.8% from $2.85 a year ago. Total revenues of $4,183.2 million declined 8.1% from the fiscal 2019 level. Homebuilding revenues also declined marginally from a year ago to $4167.7 million. Homes delivered dropped 10.1% year over year to 10,672, while ASP slightly increased to $388,900.
A Look at Recent Market Trends & Guidance
KB Home has been witnessing a significant increase in demand over the past several months on the back of resilient housing market. Notably, the company’s net orders began to rebound significantly from April 2020, with rise in housing demand. Continuous reduction in mortgage rates have boosted customers’ desire to own a home amid the pandemic, which caused third- and fourth-quarter net orders to move to 15-year highs. Also, during the fiscal fourth quarter, it increased land investments by 63% from the year-earlier quarter. As a result, KB Home expects higher community count beginning second-half 2021. The company expects to achieve significant growth in its scale and profits in fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 23.72% due to these changes.
VGM Scores
Currently, KB Home has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise KB Home has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is KB Home (KBH) Up 24.6% Since Last Earnings Report?
A month has gone by since the last earnings report for KB Home (KBH - Free Report) . Shares have added about 24.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is KB Home due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
KB Home (KBH - Free Report) Q4 Earnings & Revenues Top, Net Orders Up 42%
KB Home ended fiscal 2020 on an impressive note, with fourth-quarter fiscal 2020 revenues and earnings beating analysts’ expectations. Owing to solid housing net orders, the company expects to achieve notable growth in revenues and earnings for fiscal 2021.
Earnings & Revenue Discussion
KB Home reported quarterly earnings of $1.12 per share, which surpassed the consensus estimate of 87 cents by 28.7%. However, the metric declined 14.5% from the year-ago figure of $1.31 per share.
Total revenues of $1,194.3 million topped the consensus mark of $1,106 million by 8% but fell 23.4% on year-over-year basis due to COVID-19 impacts.
Segment Details
Homebuilding: For the quarter under review, the segment's revenues of $1,189.9 million decreased 23.4% from the prior-year period.
Number of homes delivered declined 26.8% from the year-ago level to 2,876 units. Average selling price or ASP, however, grew 5% from a year ago to $413,700.
Net orders increased 42% from the prior-year quarter to 3,937 homes, marking the highest fourth-quarter level since 2005. Value of net orders also rose 50% from the year-ago quarter to $1.58 billion.
For the reported quarter, average community count was down 8% from a year ago to 234. Quarter-end community count was 236, down 6% from the prior year. Net orders per community averaged 5.6 per month compared with 3.7 a year ago.
Cancellation rate, as a percentage of gross orders, improved to 14% from 22% reported a year ago. Its quarter-end backlog totaled 7,810 homes (as of Nov 30, 2020), up 54% from a year ago. Potential housing revenues from backlog also grew 63% from the prior-year period to $2.96 billion. This marked the highest fourth quarter-end backlog (in terms of both homes and value) since 2005.
Margins
Within homebuilding, housing gross margin (excluding inventory-related charges) improved 110 basis points (bps) year over year to 21%. The increase was attributed to a favorable pricing environment due to robust housing market demand, a mix shift of homes delivered and lower amortization of previously capitalized interest.
As a percentage of housing revenues, selling, general and administrative expenses increased 120 bps from the year-ago figure to 10.3% due to decreased operating leverage on account of lower housing revenues.
Homebuilding operating margin (excluding inventory-related charges) decreased 80 bps to 9.7%.
Financial Services revenues fell 18.1% year over year to $4,364 million. Pretax income of $9.5 million was up from $9.3 million a year ago, mainly reflecting higher income from its mortgage banking joint venture, KBHS Home Loans, LLC.
Financial Position
KB Home had cash and cash equivalents of $681.2 million as of Nov 30, 2020, significantly up from $453.8 million on Nov 30, 2019. The company had total liquidity of $1.47 billion, including $787.6 million of available capacity under the unsecured revolving credit facility. Inventories marginally increased to $3.9 billion at fiscal 2020-end from $3.7 billion as of Nov 30, 2019. Its debt to capital was 39.6% at year-end, which improved 270 bps from Nov 30, 2019. Net debt to capital was 28.6% at fiscal 2020-end, which improved 660 bps.
Fiscal 2020 Highlights
Earnings came in at $3.13 per share for the full year, reflecting an increase of 9.8% from $2.85 a year ago. Total revenues of $4,183.2 million declined 8.1% from the fiscal 2019 level. Homebuilding revenues also declined marginally from a year ago to $4167.7 million. Homes delivered dropped 10.1% year over year to 10,672, while ASP slightly increased to $388,900.
A Look at Recent Market Trends & Guidance
KB Home has been witnessing a significant increase in demand over the past several months on the back of resilient housing market. Notably, the company’s net orders began to rebound significantly from April 2020, with rise in housing demand. Continuous reduction in mortgage rates have boosted customers’ desire to own a home amid the pandemic, which caused third- and fourth-quarter net orders to move to 15-year highs. Also, during the fiscal fourth quarter, it increased land investments by 63% from the year-earlier quarter. As a result, KB Home expects higher community count beginning second-half 2021. The company expects to achieve significant growth in its scale and profits in fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 23.72% due to these changes.
VGM Scores
Currently, KB Home has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise KB Home has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.