Strong growth initiatives and built-to-order approach bode well for KB Home (KBH - Free Report) . In fact, this Los Angeles, CA-based homebuilder recently reported stellar third-quarter fiscal 2018 results, wherein earnings not only surpassed the Zacks Consensus Estimate but also increased considerably on a year-over-year basis. The remarkable performance reflects a solid housing market, regardless of rising interest rate woes. Healthy job market, higher consumer confidence, increasing household formation and demand from millennials are the reasons for strong housing market fundamentals.
A Look at Q3 Results
KB Home came up with solid quarterly results once again on robust housing fundamentals. Earnings surpassed analysts’ expectations by 11.5% in third-quarter fiscal 2018, thereby beating the consensus mark for 11 straight quarters. The company reported 7.1% revenue growth, owing to an 8% increase in deliveries. Earnings grew 71% year over year, aided by solid margins. Its adjusted housing gross profit margin of 23.1% improved 140 basis points (bps).
The company continued to effectively manage overhead cost while increasing scale, which resulted in a record low third-quarter SG&A ratio. Evidently, adjusted homebuilding operating margin surged 190 bps in the quarter.
KB Home’s shares have outperformed its industry so far this year. Earnings estimates have also been trending upward post third-quarter fiscal 2018 results. Estimates have moved 2.4% north for the current year over the past seven days.