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Mayank Marwah
Mayank Marwah
Articles (935) 

What Investors Should Know About KB Home's 3rd-Quarter Results

The company delivered 2,545 homes during the quarter

September 23, 2020 | About:

KB Home (NYSE:KBH) released its fiscal third-quarter fiscal 2020 results on Sept. 22 after the closing bell. Both earnings and revenue topped analysts' expectations.

Earnings highlights

The homebuilder posted earnings per share of 83 cents in its third quarter of fiscal 2020, up from 73 cents reported in the prior-year quarter. Revenue of $999 million was down 14% on a year-over-year basis. Analysts had predicted EPS of 31 cents per share on $895.6 million in revenue.

Chairman and CEO Jeffrey Mezger commented the following on the company's performance:

"Housing market conditions strengthened during the third quarter, fueled by the combination of historically low mortgage interest rates, a limited supply of resale inventory and consumers' desire to own a single-family home."

Housing details

The company built 2,545 homes during the quarter, down from 3,022 homes last year. The average selling price rose from $381,400 to $384,700. The average community count tumbled 7% to 238.

Net orders went up 27% to 4,214 homes for a total appreciation in value of 29% to $1.64 billion. The backlog stood at 6,749 homes, up 8% year-over-year. Potential housing revenue arising from backlog amounted to $2.57 billion, up 12%.

Housing gross profit margin jumped 140 basis points to 19.9%, 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 CEO was full of praise of the company's robust balance sheet position as well as strong liquidity of $1.51 billion:

"We believe that our Built-to-Order model is a key factor driving our sales pace, with this quarter's results underscoring the robust demand for the choice and personalization we offer to our homebuyers. As we look ahead to 2021, assuming market conditions remain favorable, we believe we are well positioned to expand our scale, and, with a leaner and more efficient operation, we anticipate accelerating our profitable growth next year, as we remain focused on generating higher returns."

Looking ahead

For the first three weeks of the fourth quarter, the company's net orders inched up 32% vs. the prior three weeks, reflecting strong demand and improvement in the housing market conditions. Cancellations dropped to 12% from 17% for the same period.

However, the company did not provide any guidance figures.

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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