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James Li
James Li
Articles (1531) 

KB Home Soars on Strong Earnings Performance to End 2020

Homebuilder sees strong growth in net home orders

January 12, 2021 | About:

Shares of KB Home (NYSE:KBH) traded higher in aftermarket trading on Tuesday on the heels of reporting fourth-quarter 2020 earnings that outperformed consensus estimates.

For the quarter ending Nov. 30, 2020, the Los Angeles-based homebuilder reported net income of $106.1 million, or $1.12 in earnings per share, compared with net income of $123.2 million, or $1.31 in earnings per share, in the prior-year quarter. Earnings of $1.12 per share outperformed the analyst estimate of $1 per share and the consensus estimate of 87 cents per share.

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Company earnings summary

KB Home CEO Jeffery Mezger said that even though the homebuilder's revenue declined over 20% year over year as the coronavirus pandemic negatively impacted operations over the past six months, net orders increased 42% as the pandemic "helped propel demand for homeownership, accentuating the financial, health, safety, and emotional benefits" offered. Countries around the globe continue to enact lockdown orders as global coronavirus cases topped 91 million as of Tuesday according to Johns Hopkins University statistics.

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Mezger said during the earnings call that the company continues finding places to improve growth, including cities like Seattle and Charlotte, North Carolina. Management added that the company has opened over 35 communities during the quarter and expects to open more communities throughout 2021.

Company's financial position

GuruFocus ranks KB Home's financial strength 4 out of 10: Although the company has a high Piotroski F-score of 8 and safe Altman Z and Beneish M scores, KB Home's cash-to-debt and debt-to-equity ratios underperform more than half of global competitors.

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Shares soar on earnings beat and favorable outlook in 2021

Shares of KB Home topped $35 in aftermarket trading on Tuesday, up over 2% from the closing price of $34.15 as the company topped earnings estimates and favorable outlook in 2021, including the sustainment of housing gross margins of at least 21%, approximately in line with margins during 2020.

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GuruFocus ranks KB Home's profitability 6 out of 10: Operating margins are expanding approximately 11.30% per year on average over the past five years despite outperforming just 57% of global competitors.

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Gurus with large holdings in KB Home include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Donald Smith & Co.

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Disclosure: No positions.

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