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KB Homes reported better than expected Q3 earnings after the market Tuesday.  The stock jumped 3% after it had been bid up over 4% with other homebuilders after a robust existing housing sales number before the report. A rise in homesales since the COVID lockdown has suprised many experts.

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KB Home NYSE: KBH Reported Earnings After Close Tuesday

$0.83 Beat $0.54 EPS AND $1.0 Billion Beat $893.24 Million forecast in revenue

Earnings

KB Home (NYSE: KBH) reported Q3 EPS of $0.83, $0.29 better than analyst estimates of $0.54. Revenue for the quarter was  $1 billion versus the consensus estimate of $893.24 million.

KB Home's report follows an earnings beat by Lennar on September 14, who reported EPS of $2.12 on revenue of $5.87B, compared to forecasts EPS of $1.55 on revenue of $5.33B. 

Earlier today US NAR August existing home sales of 6.00 million were released, up from 5.86m in July. This was the highest reading since 2006.  While some of the jump is certainly a give-back from the halt on activity in the spring with the lockdown but indications are sales will remain robust for many months to come with tight inventories. Comment from the NAR said "Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market"

 

KB Home NYSE: KBH

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

After earlier $40.50 +1.57 (+4.03%) Close

Highlights and Outlook

“We produced solid results in our third quarter, moving beyond the disruption associated with the early stages of the COVID-19 pandemic that we experienced in the spring. While our deliveries were lower compared to a year ago, our profitability rose meaningfully, led by a housing gross profit margin of 20.6%, excluding inventory-related charges, driving a 14% increase in our diluted earnings per share,” said Jeffrey Mezger, Chairman, President and Chief Executive Officer.

  • Gross Margin Expanded to 19.9%, Up 140 Basis Points Net Order Value Rose 29%;
  • Backlog Value Increased 12% to $2.6 Billion

“Housing market conditions strengthened during the third quarter, fueled by the combination of historically low mortgage interest rates, a limited supply of resale inventory and consumers’ desire to own a single-family home,” continued Mezger.

“Reflecting this strength, our net orders expanded 27% year over year, with growth in each of our four regions. We achieved a monthly absorption pace that accelerated to 5.9 orders per community, an increase of 36%, while we also increased prices in most of our communities. We believe that our Built-to-Order model is a key factor driving our sales pace, with this quarter’s results underscoring the robust demand for the choice and personalization we offer to our homebuyers."

Outlook

“As we look ahead to 2021, assuming market conditions remain favorable, we believe we are well positioned to expand our scale, and, with a leaner and more efficient operation, we anticipate accelerating our profitable growth next year, as we remain focused on generating higher returns,” concluded Mezger.

Source: KB Homes

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