KB Home (KBH, Financial) released its fourth-quarter financial results on Jan. 9 after the closing bell. While company’s earnings met Wall Street’s estimates, revenue lagged behind.
Key metrics
The homebuilder posted earnings of $1.31 per share in the fourth quarter, up 36% as compared with the prior-year quarter. Revenue surged 16% year over year to $1.56 billion. Analysts had anticipated earnings of $1.29 per share on $1.61 billion in revenue.
Housing details
The company built 3,929 homes during the quarter, which reflected a gain of 16% from the prior-year quarter. The average selling price slipped 0.7% to $392,500.
Net orders went up 38% to 2,777 homes for a total appreciation in value of 43% to $1.06 billion. The backlog stood at 5,078 homes, up 24% year over year. Potential housing revenue arising from backlog amounted to $1.81 billion, up 26% year over year. Chairman and CEO Jeffrey Mezger said:
“The fourth quarter marked an excellent finish to fiscal 2019, with particular strength in two key metrics – net order growth and housing gross profit margin.
Our net orders advanced 38% year over year, reflecting strong demand for our built-to-order product at affordable price points, together with limited inventory in our served markets. This substantial growth was driven by an increase in our community absorption pace to 3.7 net orders per month, our highest fourth quarter pace in many years, together with a 9% rise in our community count. Alongside our solid net orders was a robust gross margin, which expanded 120 basis points year over year, coming in just shy of 20%. This result was fueled, in part, by a continued reduction in our interest amortization – a significant achievement from executing on our Returns-Focused Growth Plan.”
Housing gross profit jumped 150 basis points to 19.6%, highlighting the positive impact of lower amortization of previously capitalized interest. The rise in gross margin also reflected the company’s new accounting standards.
At the end of the quarter, average community count stood at 251, reflecting a gain of 5% from the same quarter last year.
Looking forward
Mezger expressed that 2020 should be the strongest year for KB Home in the last 15 years considering the healthy job growth, solid economy, attractive interest rates and rising demand. In addition, the company is getting cost efficient and is appearing to be on the growth track.
Disclosure: I do not hold any positions in the stock mentioned.
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