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KB Homes $KBH followed fellow homebuilder Lennar $LEN with soaring revenue in Q4 earnings from the steady U.S. housing recovery. $KBH is benefitting from favorable interest rates and increased consumer confidence.

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Reaction: KB Homes NYSE: $KBH After Hours $35.65 +1.30 (+3.78%)

Earnings: EPS of 84 cents on revenue of $1.4 billion beating expected EPS of 77 cents on $1.36 billion revenue.

Highlights

  • Deliveries rose 9% to 3,340 homes
  • Average selling price rose 8% to $416,500. 
  • Net order value rose 9% to $935.4 million on a 2% increase in net orders to 2,296.
  • Backlog value rose  9% to $1.66 billion, with number of homes near flat at 4,411.

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Outlook:

The tax reform law will reduce its effective tax rate in 2018 from 37.7% to approximately 27% KB Home estimates. A one-time, non-cash charge of $115 million will be booked in Q1 for income tax provisions due to a re-measurement of its deferred tax assets, management sees the lower corporate tax rate boosting future earnings.

"As we look to 2018, we expect conditions will remain favorable in most of our served markets, with solid demand for housing driven by healthy employment, rising household incomes and strong consumer confidence, and continued limited supply," said Chairman and CEO Jeffrey Mezger in a statement.

The GOP tax legislation affect the housing market in 2018 is seen as  boosting consumer incomes and confidence overall, but potentially hurting the housing market in high-tax states hit by the limit on deductions for state and local taxes.

Citi downgraded KB Home to sell last week because of it's 31% exposure to California and the likelihood it will write down the value of deferred tax assets from past losses.

Lennar $LEN reported before the marketLennar $LEN reported before the market open Wednesday, crushing revenue but due to tax treament missed on expected EPS.

Source: KB Homes, AlphaStreet

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