KB Homes New Homes Average Selling Price Up 21% Year-on-Year but Sales Pace Slackened

KB Homes reported better than expected Q2 earnings after the market Wednesday, however its sales pace slackened as buyers faced higher mortgage interest rates and soaring inflation. The stock was higher with other homebuilders after the report. Earlier today the Mortgage Bankers Association showed mortgage applications in the US w.e. 17 June rose another 4.2% after rising 6.6% the prior week.

Buyers appear to be trying to get in ahead of more Fed rate rises. The average long-term mortgage rate climbed by another 33 bps to its highest since November 2008. $KBH said the average selling price of its new homes up 21% year-on-year to $494,300.

kb home

KB Home NYSE: KBH Reported Earnings After Close Wednesday

$2.32 Beat $1.50 EPS AND $1.72 Billion Beat $1.65 Billion forecast in revenue

Earnings Highlights

  • Homebuilder KB Home (NYSE: KBH) reported earnings of $211 million, or $2.32 a share, in the second quarter, compared with $143 million, or $1.50 a share, in the year-ago quarter.
  • Revenue rose 19% to $1.72 billion, consensus called for earnings of $2.04 a share on sales of $1.65 billion.
  • Average selling price of its new homes up 21% year-on-year to $494,300
  • Housing gross profit margin jumped 340 basis points to 20.8% with the positive impact of lower amortization of previously capitalized interest.
  • KBH managed increased operating leverage due to higher housing revenue.

“Sales rates are moderating from the exceptional levels the industry has experienced, as buyers process the impact of higher mortgage interest rates, as well as inflationary pressures,” Chief Executive Jeffrey Mezger said in a statement.

Market Reaction: $26.90▲ 0.67 (▲2.55%) After Hours

Outlook

KB Home guided for revenue from housing between $7.3 billion and $7.5 billion in fiscal 2022, with the average selling price rising to about $500,000.

KB Home’s flexible “built-to-order” model, with several floorplans and prices to choose from, will help it navigate the “changing market conditions,” Mezger said.

The company also promised to remain “strategic” in allocating its capital, and said that it owns or controls all the lots it needs to support new-home delivery targets through 2024.

“As a result, we are in a favorable position to calibrate our land investments to evolving conditions, without compromising our mid-term growth, providing us with opportunities to redeploy capital to stockholders,” Mezger said.

Source: KB Homes

Disclosure: I do not hold any positions in the stocks mentioned_

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