KB Home

The Adventures of Sherlock Holmes

KB Home operates a homebuilding and financial services business serving homebuyers in markets nationwide. It constructs and sells homes through its operating divisions across the United States under the name KB Home. The Company operates in 10 states and 30 markets, including California, Arizona, Nevada, Colorado, Texas, Florida, Maryland, North Carolina, South Carolina and Virginia. The Company's homebuilding operations offer a variety of homes designed primarily for first-time, first move-up and active adult buyers. The Company's financial services operations offer mortgage banking, title and insurance services to its homebuyers.

KB Home has listed in New York Stock Exchange since August 1, 1986. KB Home has P/E Ratio -16.89, Indicated Annual Dividend 0.25, Beta Coefficient 1.66, Earnings per Share -0.90 and Shares Outstanding 88,047,800.

KB Home said Friday its new home orders and completed sales fell sharply in the fiscal fourth quarter, even as the homebuilder saw traffic from prospective buyers increase for the first time since the housing boom ended.

Despite selling fewer homes, the company bucked Wall Street forecasts and posted a profit for the September-November quarter, aided by improved prices and lower expenses.

Management said it's not likely that the company will be profitable in the first quarter, but it believes it is well positioned to post a full-year profit.

Investors appeared pleased with the results. KB shares gained 94 cents, or 6.6 percent, to $15.27 during afternoon trading.

High unemployment, tighter bank lending standards and uncertainty about home prices have kept people from buying homes. Government tax credits propped up sales last spring, but demand weakened after the incentive expired in April.

The Los Angeles-based company reported its net orders tumbled 25 percent from a year earlier during the quarter. It also delivered 37 percent fewer homes, largely due to an unexpected increase in canceled home orders as banks tightened underwriting standards.

President and CEO Jeffrey Mezger said that while the economy appears to be recovering, it has yet to create sustained job growth or lift consumer confidence.

"We recognize that without these two drivers the combination of soft demand and excess supply will continue to be a challenge and the overall housing recovery will be a slow one," he said.

However, the executive noted customer traffic at its home design studios increased for the first time in five years during the quarter and into last month.

If that trend holds up, that could bode well for the spring, traditionally the strong selling season for homes.

Mezger stopped short of saying he's anticipating a strong spring, however.

"I'm optimistic of how we've positioned the company," Mezger said in an interview. "I'm cautious on (whether this is) a sustained economic recovery and how long will it take to play out into an overall housing recovery."

Still, KB clearly expects higher home orders in coming months.

The builder plans to open 70 new home communities in the first half of this year, primarily in California and Texas.

The company says it sees signs some markets close to job hubs in those states are showing more stable home prices, fewer foreclosures and a more balanced ratio of unsold homes to homebuyer demand.

"There are parts of California and the coastal areas that are doing fine in housing," Mezger said.

However, KB won't be adding many jobs, if any, as it opens more communities, Mezger said.

The strategy should help gin up jobs outside the company, though.

Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

KB Home builds homes to order for entry level, move-up buyers and seniors in 12 states.

The builder earned $17.4 million, or 23 cents per share, for the three months ended Nov. 30. That's down 83 percent from a profit of $100.7 million, or $1.31 per share, a year earlier, when KB Home benefited from a $191.7 million tax benefit.

Analysts surveyed by FactSet expected a loss of 19 cents per share.

The homebuilder's revenue dropped to $451 million from $674.6 million, but topped Wall Street's $446.4 million.

Housing revenue declined 28 percent, while land sale revenue slid to $1.9 million from $52.7 million.

The builder delivered 1,918 homes during the quarter. The average selling price climbed 14 percent to $232,500.

Net orders totaled 1,085, while the cancellation rate rose to 29 percent from 17 percent in the prior-year period.

Mezger attributed the rise in cancellations in October and November to more stringent underwriting standards by mortgage lenders. He said many buyers who were initially approved for a loan were declined after construction on their home neared completion.

For the year, KB Home lost $69.4 million, or 90 cents per share. This compares with a loss of $101.8 million, or $1.33 per share, a year earlier. Revenue for the year fell 13 percent to $1.59 billion.