Earnings Reports To Watch: KB Home (KBH)

KB Home (NYSE:KBH) reported earnings for the three months ended May 2016 on June 21, 2016. The company earned $0.17 per share on revenue of $811.05M. Analysts had been modeling earning per share of $0.14 with $747.06M in revenue.

KB Home (NYSE:KBH) reported results for its second quarter ended May 31, 2016.

Three Months Ended May 31, 2016 (comparisons on a year-over-year basis)

  • Total revenues rose 30% to $811.1 million.
  • Housing revenues increased 33% to $807.4 million.
  • Deliveries grew 30% to 2,329 homes, reflecting double-digit increases in all four of the Company’s regions.
  • Average selling price increased 2% to $346,700.
  • Housing gross profit margin decreased 50 basis points to 15.5%, reflecting approximately 80 basis points of inventory-related charges.
  • Adjusted housing gross profit margin, which excludes the amortization of previously capitalized interest and inventory-related charges, improved 40 basis points to 20.7%.
  • Selling, general and administrative expenses improved 140 basis points to 11.6% of housing revenues.
  • Homebuilding operating income increased 45% to $25.9 million despite total inventory impairment and land option contract abandonment charges of $11.7 million, of which $6.8 million related to the Company’s wind down of its Metro Washington, D.C. operations. Inventory-related charges in the year-earlier quarter totaled $.5 million.
    • Homebuilding operating income margin improved 30 basis points to 3.2%. Excluding inventory-related charges, homebuilding operating income margin rose 170 basis points to 4.7%.
  • Pretax income increased 96% to $24.8 million.
  • Income tax expense of $9.2 million was favorably impacted by $.4 million of federal energy tax credits earned from building energy-efficient homes and represented an effective tax rate of 37.1%.
  • Net income rose 63% to $15.6 million and earnings per diluted share increased to $.17, with both metrics unfavorably impacted by inventory-related charges.

Six Months Ended May 31, 2016 (comparisons on a year-over-year basis)

  • Total revenues increased 24% to $1.49 billion.
  • Deliveries rose 27% to 4,282 homes.
  • Average selling price increased 3% to $345,600.
  • Land sale revenues totaled $4.2 million, compared to $68.9 million.
  • Homebuilding operating income rose 39% to $44.9 million.
  • Net income increased 65% to $28.7 million and earnings per diluted share advanced to $.31 from $.18.

Backlog and Net Orders (comparisons on a year-over-year basis)

  • Ending backlog value grew 14% to $1.83 billion, reflecting increases in all regions.
  • Homes in backlog rose 10% to 5,205.
  • Net order value for the quarter grew 14% to $1.20 billion.
  • Net orders for the quarter increased 8% to 3,249.
  • The cancellation rate as a percentage of beginning backlog for the quarter improved to 21% from 25%, and as a percentage of gross orders improved to 21% from 22%.
  • Average community count for the quarter decreased 2% to 242.

Balance Sheet (as of May 31, 2016)

  • Cash, cash equivalents and restricted cash totaled $278.4 million.
  • Inventories totaled $3.53 billion, with investments in land acquisition and development totaling $702.6 million for the six months ended May 31, 2016.
  • Lots owned or controlled totaled 47,283, of which 82% were owned.
  • There were no cash borrowings outstanding under the unsecured revolving credit facility.
  • Average diluted shares outstanding for the quarter were reduced 7% from the year-earlier quarter to 94.7 million, reflecting repurchases of nearly 8.4 million shares of common stock during the 2016 first quarter at a total cost of $85.9 million. No shares were repurchased in the 2016 second quarter.

KB Home earnings per share showed a decreasing trend of -90.8% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 161%.Analysts project EPS growth over the next 5 years at 27.9%. It has EPS annual growth over the past 5 fiscal years of 24.1% when sales grew 13.8. It reported 16.9% sales growth, and 66.5% EPS growth in the last quarter.

The stock is trading at $15.08, up 67.51% from 52-week low of $9.04. The stock trades down -12.77% from its peak of $17.42 and % below the consensus price target of $14.96. Its volume clocked up at 2.9 million shares which is lower than the average volume of 3 million shares. Its market capitalization currently stands at $1.25B.

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