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KB Homes report  Q2 earnings after the market. A decline in homebuilding revenue has hurt the top line in the past year. $KBH stock has run higher with mortgage applications their highest level since September 2016. Refinancing activity the highest since November 2016.

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KB Home NYSE: KBH Reported Earnings After Close Wednesday

$0.51 Beat $0.40 EPS AND $1.02B Beat $936.35 Million forecast in revenue

Earnings

KB Home earned $47.5 million, or 51 cents a share, in the quarter, compared with $57.3 million, or 57 cents a share, in the year-ago period. Revenue fell to $1.02 billion, compared with $1.10 billion a year ago. Analysts had expected revenues of $936.35 million, down 15% year-over-year) and profits of 40 cents per share down -29.8% YoY.

Homebuilder stocks have been stand outs in 2019, much of this is due to coming off sell offs last year but because lower borrowing costs have sparked a run of homebuying. KBH is one of the benificiaries and it;s stock is up almost 34% year-to-date. Two weeks ago mortgage applications jumped to their highest level since September 2016. Refinancing activity the highest since November 2016 accounted for 49.8% of mortgage applications as mortage rates continued to fall.

At the last Fed meeting Chair Powell didn;t lower rates but he did speak of the potential seeing the SPX and DJIA run to all time highs. 

KB Home NYSE: KBH

Market Reaction After hours $25.25 +1.72 (+7.31%)

Highlights and Outlook

"With net order value up 13% year over year to $1.5 billion, driven by double-digit order growth in each of our four regions, and continued year-over-year community count growth anticipated for our third and fourth quarters, we are confident we can produce further improvement in our results in the second half of this year," the company said in a statement.

Analysts have different ideas on the strength of homebuilding stocks. Raymond James’ Buck Horne recently downgrading $KBH to “Underperform” on its “rich” valuation on the nasis the market is ahead of itself. Over at  RBC Capital Markets, Mike Dahl sees “early signs of recovery in its key Western markets,”  seeing him upgrade KBH to “Outperform” and raise his price target from $25 to $30.

KB Home Q2 Earnings Recap

$0.31 Beat $0.26 EPS But $811.5 Million Missed $831.8 Million forecast in revenue

Earnings 

KB Homes net income for the quarter was $30 million or $0.31 per share compared to a loss of $71.3 million or $0.82 per share in the previous year quarter. However, revenue fell 7% to $811.5 billion due to lower homebuilding revenue.

Wall Street estimated earnings per share of 26 cents on $831.8 million, according to Refinitiv. KB Home’s results came after weak housing data released earlier Tuesday with the House prices ring a seasonally adjusted 0.1% in January the S&P CoreLogic Case-Shiller 20-city index showed. Price gains were 3.6% higher compared to a year ago. However that is the slowest annual growth since 2012 with a monthly decline for the third-straight month.

US February housing starts were also released at1162K vs 1210K expected from the prior 1230K (revised to 1273K). The fall was large at -8.7% vs -1.6% expected. US February building permits were also weaker at 1296K vs 1305K exp from the prior 1345K (revised to 1317K). The fall was -1.6% vs -0.9% expected.

KB Home NYSE: KBH

Market Reaction After hours $24.65 +0.57 (+2.37%)

Highlights and Outlook

  • The company delivered a total of 2,152 homes during the quarter, down 3.2% compared to last year.
  • The average selling price declined 5% to $370,900 due primarily to a shift in geographic mix of homes delivered and a lower average selling price in the company’s West Coast region.
  • Net orders for the first quarter fell 4% to 2,675, and net order value dropped 13% to $1.02 billion.
  • The number of homes in ending backlog decreased 6.9% to 4,631 and ending backlog value plunged 16% to $1.66 billion.
  • The decrease in backlog value reflects fewer homes in backlog and the lower average selling price of those homes due to a shift in geographic mix.
  • The company had total liquidity of $978.5 billion as of February 28, 2019, including cash and cash equivalents of $511.7 million. Inventories increased by 3% to $3.68 billion.
  • Stockholders’ equity increased by 2% to $2.13 billion from November 30, 2018.

KB Home Q1 2019 Earnings

Source: KB Homes, Alpha Street

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