KB Home (KBH, Financial) released its fiscal first-quarter 2021 results after the closing bell on March 24. While earnings topped analysts' expectation, revenue came in below projections despite robust order numbers.
Earnings highlights
The homebuilder posted earnings of $1.02 per share, up from $0.62 reported in the prior-year quarter. Revenue of $1.14 billion jumped 6% on a year-over-year basis. Analysts had predicted earnings of 87 cents per share on $1.21 billion in revenue.
Chairman and CEO Jeffrey Mezger commented on the company's performance:
"The ongoing strength in our order activity reflects the favorable demographics underlying demand. Millennials, the largest adult population in the U.S., are now in their prime homebuying years and continue to represent our largest cohort of buyers, underscoring our competitive advantage in serving first-time buyers and success in building homes in desirable locations at affordable price points."
Housing details
The company built 2,864 homes during the quarter, up from 2,752 homes last year. The average selling price rose 2% to $397,100. The average community count was down 11% to 223.
Net orders went up 23% to 4,292 homes for a total appreciation in value of 35% to $1.87 billion. The backlog stood at 9,238 homes, up 59% year over year. Potential housing revenue arising from backlog amounted to $3.69 billion, up 74%. This is the company's highest backlog level in the last 15 years.
"With our full year coming into better view, supported by a 74% year-over-year increase in our backlog value and our ability to match housing starts to net orders, we believe we are now even better positioned for meaningful growth in 2021," Mezger said. "We are executing on our plan to expand our scale while driving both margins and returns higher."
The housing gross profit margin jumped 340 basis points to 20.8%, highlighting the positive impact of lower amortization of previously capitalized interest. Increased operating leverage due to higher housing revenue also helped.
KB Homes had cash and cash equivalents of $569.8 million at quarter's end, down from $681.2 million in the previous quarter, and total liquidity of $1.36 billion.
Covid-19 impact
Due to the coronavirus pandemic, the U.S. housing market was rigorously disrupted during the first half of 2020, with the combination of supply issues and the unexpected sharp boost to housing demand. KB Home's net orders and backlog were reduced significantly at the outset but soon started rising sharply. Low mortgage interest rates also boosted housing demand during the period.
Looking ahead
Since the end of the first quarter, KB Home said it has experienced growth in its gross and net orders, reflecting strong demand and improvements in housing market conditions. Moreover, cancellations have dropped in the second quarter so far as compared with the prior 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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