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KB Home (KBH) Tops Q4 Earnings Estimates, Backlog Strong

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KB Home KBH reported impressive fourth-quarter fiscal 2016 earnings of 40 cents per share that surpassed the Zacks Consensus Estimate of 37 cents by 8.1%. On a year-over-year basis, the reported figure was down 7%.

Total revenue of $1,191.9 million in the quarter beat the Zacks Consensus Estimate of $1,168 million by 2%. That said, revenues registered a 20.9% year-over-year increase, driven by higher housing revenues.

Shares of the homebuilder gained 2.41% in the after-hours trading session after the earnings release on Jan 10. Though earnings remain subdued owing to soft performance by Financial Services, investors are impressed with the company’s revenue as well as backlog levels.

Segment Details

Homebuilding Revenue: In the reported quarter, homebuilding revenues grew 21% year over year to $1,188.6 million, driven by double-digit increase in the number of homes delivered. Land generated $3.2 million in revenues, up 44%. Housing revenues of $1,185.4 million improved 21% from the year-ago quarter.

Net orders rose 19.8% to 2,254 homes, driven by demand growth in the housing markets served by KB Home. Value of net orders climbed 26.6% to $855.9 million.

Number of homes delivered jumped 18.6% to 3,060 homes, buoyed by double-digit increases in the company's West Coast, Central and Southeast regions. Average selling price went up 2% to $387,400.

At the end of the reported quarter, average community count was 231, down 8% year over year.

The company’s backlog totaled 4,420 homes (as of Nov 30, 2016), up 11% year over year. Potential housing revenues from backlog increased 19% to $1.52 billion, with all the regions registering double-digit gains barring Southeast region. This marks the company’s highest backlog value in a decade.

Margins

Adjusted housing gross profit margin (excluding the amortization of previously capitalized interest and inventory-related charges) contracted 60 basis points (bps) to 21.6%.

As a percentage of housing revenues, selling, general and administrative expenses (SG&A) improved 80 bps to 9.2% owing to increased housing revenues. This marks the lowest ratio in the company's history.

Adjusted homebuilding operating margin (after excluding inventory-related charges) decreased 250 bps to 4.7% from 7.2% a year ago.

Financial Services: In the quarter, Financial Services’ revenues dropped 10.2% year over year to $3.3 million.

Financial Position

KB Home had homebuilding cash, cash equivalents and restricted cash of $592.1 million as of Nov 30, 2016, higher than $568.4 million as of Nov 30, 2015.

Homebuilding debt amounted to $2.05 billion as of Nov 30, 2016, compared with $2.03 billion as of Nov 30, 2015, reflecting a net debt-to-capitalization ratio of 54.3%, lower than 54.6% as of 2015-end.

KB Home currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Peer Releases

DR Horton Inc. DHI is likely to report first-quarter fiscal 2017 results on Jan 24. The Zacks Consensus Estimate for the quarter’s earnings stands at 47 cents per share.

PulteGroup, Inc. PHM is slated to release fourth-quarter 2016 earnings on Jan 26. The Zacks Consensus Estimate for the quarter’s earnings is 58 cents per share.

Masco Corporation (MAS - Free Report) will release fourth-quarter 2016 earnings on Feb 9. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents per share.

KB Home Price, Consensus and EPS Surprise

 

KB Home Price, Consensus and EPS Surprise | KB Home Quote

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