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KB Home (KBH) Up 6.3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for KB Home (KBH - Free Report) . Shares have added about 6.3% 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 reported mixed results for first-quarter fiscal 2021. Earnings surpassed the Zacks Consensus Estimate. However, revenues missed the same.
Earnings & Revenue Discussion
KB Home reported quarterly earnings of $1.02 per share, which surpassed the consensus estimate of 87 cents by 17.2%. Also, the metric grew 61.9% from the year-ago figure of 63 cents per share.
Total revenues of $1,141.7 million missed the consensus mark of $1,210 million by 5.3%. Nonetheless, revenues grew 6.1% on a year-over-year basis.
Segment Details
Homebuilding: For the quarter under review, the segment's revenues of $1,138 million increased 6.1% from the prior-year period.
The number of homes delivered grew 4.1% from the year-ago level to 2,864 units, marking the highest first-quarter level since 2008. Further, average selling price or ASP increased 2% from a year ago to $397,100.
Net orders increased 23% from the prior-year quarter to 4,292 homes, marking the highest first-quarter level in 14 years. Moreover, value of net orders rose 35% from the year-ago quarter to $1.87 billion.
For the reported quarter, average community count was down 11% from a year ago to 223. Quarter-end community count was 209, down 16% from the prior year. Net orders per community averaged 6.4 per month, up 39% compared with 4.6 a year ago.
Cancellation rate, as a percentage of gross orders, reduced to 10% from 14% reported a year ago. Its quarter-end backlog totaled 9,238 homes (as of Feb 28, 2021), up 58.7% from a year ago. Further, potential housing revenues from backlog grew 74% from the prior-year period to $3.69 billion.
Margins
Within homebuilding, housing gross margin (excluding inventory-related charges) improved 320 basis points (bps) year over year to 21.1%. The increase was attributed to a favorable pricing environment due to robust housing market demand, increased operating leverage due to higher revenues and lower amortization of previously capitalized interest.
As a percentage of housing revenues, selling, general and administrative expenses improved 110 bps from the year-ago figure to 10.7% due to reduced overhead costs, lower advertising costs, partly reflecting the strong housing demand and increased operating leverage from higher revenues.
Financial Services revenues rose 5% year over year to $3,730 million. Pretax income of $8.5 million was up from $5.8 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 $569.8 million as of Feb 28, 2021, down from $681.2 million on Nov 30, 2020. The company had total liquidity of $1.36 billion, including $787.6 million of available capacity under the unsecured revolving credit facility.
Inventories increased 6% from Nov 30, 2020, to $4.12 billion at the end of first-quarter fiscal 2021.
Its debt to capital was 38.9% at the year-end, down from 39.6% as of Nov 30, 2020, (marking an improvement of 70 bps).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 7.57% due to these changes.
VGM Scores
Currently, KB Home has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly 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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KB Home (KBH) Up 6.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for KB Home (KBH - Free Report) . Shares have added about 6.3% 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) Q1 Earnings Beat, Revenues Miss, Orders Rise 23%
KB Home reported mixed results for first-quarter fiscal 2021. Earnings surpassed the Zacks Consensus Estimate. However, revenues missed the same.
Earnings & Revenue Discussion
KB Home reported quarterly earnings of $1.02 per share, which surpassed the consensus estimate of 87 cents by 17.2%. Also, the metric grew 61.9% from the year-ago figure of 63 cents per share.
Total revenues of $1,141.7 million missed the consensus mark of $1,210 million by 5.3%. Nonetheless, revenues grew 6.1% on a year-over-year basis.
Segment Details
Homebuilding: For the quarter under review, the segment's revenues of $1,138 million increased 6.1% from the prior-year period.
The number of homes delivered grew 4.1% from the year-ago level to 2,864 units, marking the highest first-quarter level since 2008. Further, average selling price or ASP increased 2% from a year ago to $397,100.
Net orders increased 23% from the prior-year quarter to 4,292 homes, marking the highest first-quarter level in 14 years. Moreover, value of net orders rose 35% from the year-ago quarter to $1.87 billion.
For the reported quarter, average community count was down 11% from a year ago to 223. Quarter-end community count was 209, down 16% from the prior year. Net orders per community averaged 6.4 per month, up 39% compared with 4.6 a year ago.
Cancellation rate, as a percentage of gross orders, reduced to 10% from 14% reported a year ago. Its quarter-end backlog totaled 9,238 homes (as of Feb 28, 2021), up 58.7% from a year ago. Further, potential housing revenues from backlog grew 74% from the prior-year period to $3.69 billion.
Margins
Within homebuilding, housing gross margin (excluding inventory-related charges) improved 320 basis points (bps) year over year to 21.1%. The increase was attributed to a favorable pricing environment due to robust housing market demand, increased operating leverage due to higher revenues and lower amortization of previously capitalized interest.
As a percentage of housing revenues, selling, general and administrative expenses improved 110 bps from the year-ago figure to 10.7% due to reduced overhead costs, lower advertising costs, partly reflecting the strong housing demand and increased operating leverage from higher revenues.
Homebuilding operating margin (excluding inventory-related charges) increased 430 bps to 10.4%.
Financial Services revenues rose 5% year over year to $3,730 million. Pretax income of $8.5 million was up from $5.8 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 $569.8 million as of Feb 28, 2021, down from $681.2 million on Nov 30, 2020. The company had total liquidity of $1.36 billion, including $787.6 million of available capacity under the unsecured revolving credit facility.
Inventories increased 6% from Nov 30, 2020, to $4.12 billion at the end of first-quarter fiscal 2021.
Its debt to capital was 38.9% at the year-end, down from 39.6% as of Nov 30, 2020, (marking an improvement of 70 bps).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 7.57% due to these changes.
VGM Scores
Currently, KB Home has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly 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.