KB Home sees prices, profit grow in third quarter

More sales of higher-priced houses, especially in the West, powered KB Home to higher revenue and profit in its fiscal third quarter, but the Los Angeles-based home builder’s stock price was falling Wednesday after the results came in below analyst expectations.

In an earnings report Wednesday morning, the company said the number of homes it sold this summer dipped slightly, thanks to construction delays and slower mortgage closings. But the average price of those houses climbed 9%, to $327,000. In Western markets, including its home base of Southern California, KB’s average selling price surged by one-fifth, to $579,700.

The company credited those results to a new focus on higher-priced homes in areas with tight supply and higher income, and said that approach should continue to pay dividends.

“An increasing proportion of the new home communities we have opened recently is the product of our targeted investments in attractive, land-constrained submarkets,” said Chief Executive Jeffrey Mezger. “These communities are fueling measurable expansion in our net order value and the potential future housing revenues and profits embedded in our backlog.”

Overall, KB reported revenue of $589.2 million in the three months ended Aug. 31, up 7% from the same period last year. Profit was $28.4 million, up 4%. Earnings per share fell two cents from the year before to 28 cents as the company had more shares outstanding.

Analysts polled by Thomson Reuters had projected profit of $647 million and 40 cents per share. The company’s stock was down 95 cents, or 5.6%, at $16.01 in midsession trading Wednesday.

Keep an eye on housing and real estate in Southern California. Follow me on Twitter at @bytimlogan