KB Home's (KBH) Q3 Earnings Beat, Revenues Miss Estimates
Zacks Investment Research | Sep 25, 2019 11:19PM ET
KB Home (NYSE:KBH) reported third-quarter fiscal 2019 results, wherein earnings beat analysts’ expectation but revenues missed the same. Shares fell 2% following the news but closed 3% higher at $32.38 on Sep 25.
The results mainly benefited from continued progress of the Returns-Focused Growth plan, given stellar average community count growth. Although the company’s top and bottom lines declined on a year-over-year basis, it remains upbeat about improvement in fiscal fourth-quarter results.
KB Home’s $2.3-billion backlog is expected to drive strong growth in 2020. It believes that declining mortgage/interest rates, steady economic growth and favorable demographics — in particular household formation — will continue providing a healthy backdrop for the housing industry, which includes biggies like Lennar (NYSE:LEN) , PulteGroup, Inc. (NYSE:PHM) and D.R. Horton, Inc. (NYSE:DHI) .
Earnings & Revenue Discussion
Quarterly earnings of 73 cents per share outpaced the Zacks Consensus Estimate of 65 cents by 12.3% but declined 16.1% from 87 cents a year ago.
Total revenues of $1,160.8 million missed the consensus mark of $1,170 million by 0.8%. In addition, the top line declined 5.3% year over year, mainly due to lower average selling price (“ASP”) of homes delivered.
Segment Details
Homebuilding Revenues: In the reported quarter, the segment's revenues fell 5.3% from the prior-year period to $1,156.9 million due to lower ASP of homes delivered. While land generated $4.2 million in revenues (up from $2.3 million a year ago), housing revenues totaled $1,152.6 million (declining from $1,219.6 million). The decrease in housing revenues mainly stemmed from a decline in ASP in the West Coast region due to mix shift toward deliveries in lower-price inland markets and the absence of certain communities with relatively high ASPs that closed out in prior quarters.
Net orders grew 24% from the prior-year quarter to 3,325 homes, increasing in double digits across all regions served by the company. Value of net orders also increased 25% from the year-ago quarter to $1.28 billion.
Moreover, number of homes delivered increased 1.1% from the year-ago level to 3,022 units. Deliveries increased in three regions (West Coast, Central and Southeast). However, ASP fell 7% from a year ago to $381,400, mainly due to a shift in geographic mix of homes delivered. Lower ASP in the West Coast region also added to the woes.
At the end of the reported quarter, average community count was 255, up 18% year over year. Notably, net orders per community averaged 4.3 per month in the quarter, up from 4.1 recorded in the prior year. The company’s backlog totaled 6,230 homes (as of Aug 31, 2019), up 14% from a year ago. Potential housing revenues from backlog grew 13% from the prior-year period to $2.04 billion.
KB Home Price, Consensus and EPS Surprise
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