Home builder KB Home (KBH) on Wednesday reported a 4 percent increase in profit for the third quarter from last year, reflecting growth in home building revenues and margins due to higher selling prices.
This was partly offset by lower home deliveries. Both revenue and earnings per share for the quarter missed analysts' estimates.
Jeffrey Mezger, president and chief executive officer of KB Home said, "In a slowly recovering economic and housing market environment, we are consistently producing profitable results, growing our community count and generating our highest backlog value since 2008. We are clearly seeing the impact of strategies that we have implemented over the past few years."
The Los Angeles, California-based company's net income for the third quarter was $28.36 million, up from $27.28 million in the prior-year quarter. However, earnings per share declined to $0.28 from $0.30 in the year-ago period, on higher number of weighted average shares outstanding.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.40 per share for the quarter. Analysts' estimate typically excludes one-time items.
Total revenues for the quarter grew 7 percent to $589.21 million from $548.97 million in the same quarter last year, but missed analysts' consensus estimate of $646.76 million.
The increase in revenues was due to growth in the company's housing revenues from higher average selling prices. The overall average selling price of $327,000 for the quarter rose 9 percent from the year-ago period.
Average selling prices were higher across all of the company's homebuilding regions compared to the year-ago period, with increases ranging from 9 percent in the Central and Southeast regions to 21 percent in the West Coast region.
Home building revenues also increased 7 percent from the prior-year quarter to $586.23 million.
However, the company delivered 1,793 homes in the quarter, down from 1,825 homes in the year-ago quarter. Deliveries in the quarter were tempered by delays in construction schedules and customer mortgage loan closings that resulted in some deliveries being deferred to the fourth quarter.
Housing gross profit margin for the quarter increased 60 basis points from last year to 18.8 percent.
Company-wide net orders for the quarter rose 5 percent from the prior-year period to 1,827 homes. The overall value of net orders for the quarter rose 19 percent from last year to $629.25 million. Three of the company's four homebuilding regions reported year-over-year growth in net order value.
Backlog at the end of the third quarter was 3,432 homes, up 13 percent from the prior-year period. This represents potential future housing revenues of about $1.10 billion, up 37 percent from $808.48 million in the same period last year.
Looking ahead, Mezger said, "During the third quarter, there was an appreciable uptick in our traffic levels which we see as evidence of the pent-up demand for new housing and strong interest in our product offerings. We believe demand will continue to strengthen as consumer confidence, household incomes and mortgage availability improve, creating even greater opportunities to achieve continued success in our served markets."
KBH closed Tuesday's trading at $16.97. In Wednesday's pre-market activity, the stock is down $1.17 or 6.89 percent to $15.80.
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