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Mayank Marwah
Mayank Marwah
Articles (884) 

KB Home’s 2nd-Quarter Earnings and Revenue Fall Short of Projections

The company delivered 2,499 homes during the quarter

June 25, 2020 | About:

KB Home (NYSE:KBH) released its second-quarter results on June 24 after the closing bell. The home builder’s earnings and revenue both fell short of analysts’ projections.

Key metrics

The Los Angeles-based company posted earnings per share of 55 cents in its second quarter of fiscal 2020, up from the 51 cents reported in the prior-year quarter. Revenue of $914 million jumped 10.6% on a year-over-year basis. Wall Street analysts had predicted EPS of 57 cents on $1.07 billion in revenue.

The company built 2,499 homes during the quarter, down from 2,768 homes last year. The average selling price dropped from $367,700 to $364,100. The average community count tumbled 2% to 247.

Net orders went down 57% during the quarter, driven primarily by the coronavirus pandemic and the resulting lockdowns. The backlog stood at 5,080 homes. That compares with backlog of 5,927 homes the year before. Potential housing revenue arising from backlog amounted to $1.90 billion.

The housing gross profit margin jumped 100 basis points to 18.2%, highlighting the positive impact of lower amortization of previously capitalized interest. This was only partly negated by reduced operating leverage courtesy of lower housing revenue.

The company had a robust balance sheet position with cash and cash equivalents of $575 million at quarter's end, up from $453.8 million in the previous year, and total liquidity of $1.36 billion.

For the first three weeks of the third quarter, the company’s gross orders inched up 4% and net orders surged 2% vs. the prior three weeks. Cancellations dropped to 21% for the same period.

Chairman and CEO Jeffrey Mezger commented the following:

“Following a low point in April, we are very encouraged by the resilience of housing market demand. We experienced steady and significant improvement in our order trends beginning in May, which was further fueled by welcoming walk-in traffic to our communities. This improvement has accelerated dramatically in the first three weeks of June during which time we have achieved a modestly positive year-over-year comparison, as orders have returned to more normalized levels.”

For the third quarter, KB Home anticipates housing revenue to fall within the range of $820 million to $880 million.

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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