Yahoo Finance KB Home (KBH) Q2 Earnings & Revenues Top Estimates, Stock Up
KB Home KBH reported impressive results in the second quarter of fiscal 2024 (ended May 31, 2024). Both earnings and revenues beat the Zacks Consensus Estimate. Shares of this leading homebuilder rose 2.2% in the after-market trading session on Jun 18.
On an encouraging note, earnings increased on a year-over-year basis despite a revenue decline.
Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Earnings & Revenue Discussion
KBH reported adjusted earnings per share of $2.15, which beat the consensus estimate of $1.78 by 20.8% and increased 11% from the year-ago quarter’s $1.94. The upside was mainly backed by the favorable impact of repurchases over the past several quarters.
KB Home Price, Consensus and EPS Surprise
KB Home price-consensus-eps-surprise-chart | KB Home Quote
Total revenues of $1.71 billion topped the consensus mark of $1.64 billion by 4.3% but decreased 3.4% on a year-over-year basis.
Segment Details
Homebuilding: The segment's revenues of $1.7 billion fell 3.2% from the prior-year quarter’s level. The number of homes delivered was 3,523 units, down 3.9% from the year-ago period’s level. However, the average selling price, or ASP, increased 0.7% from a year ago to $483,000.
Net orders grew 1.5% to 3,997 units from the prior year. The value of net orders was up 6.8% from the year-ago quarter to $2.03 billion, depicting improved demand conditions and a lower cancelation rate compared with the year-ago period. Absorption or monthly net orders per community increased to 5.5 from 5.2.
The cancelation rate, as a percentage of gross orders, was 13% compared with 22% in the year-ago period.
The quarter-end backlog totaled 6,270 homes, down 13.9% from the year-ago figure of 7,286 units. Further, potential housing revenues from the backlog declined 9.8% from the prior-year period to $3.12 billion.
The average community count was down to 243 from 253, and the ending community count stood at 247 compared with 249 a year ago.
Within homebuilding, the housing gross margin (excluding inventory-related charges) declined 20 basis points (bps) year over year to 21.2%.
Selling, general and administrative expenses (SG&A) — as a percentage of housing revenues — increased 50 bps from the year-ago figure to 10.1%, reflecting higher marketing and other expenses.
Homebuilding’s operating margin (excluding inventory-related charges) was down 60 bps to 11.1%.
Financial Services: The segment's revenues rose 11.1% year over year to $8.3 million. The pretax income was $13.3 million, up 16% from a year ago.
Financial Position
KB Home had cash and cash equivalents of $643.5 million as of May 31, 2024, down from $727.1 million reported at the end of fiscal 2023. The company had a total liquidity of $1.73 billion, including $1.08 billion of available capacity under the unsecured revolving credit facility. No cash borrowings were outstanding under the revolver on May 31, 2024.
As of the end of the fiscal second quarter, the debt-to-capital ratio improved to 29.8%, down from 30.7% at the end of 2023.
In the fiscal second quarter, it repurchased approximately 0.76 million shares of its outstanding common stock for $50 million. In fiscal 2023, KBH repurchased 9.2 million shares for $411.4 million. As of May 31, 2024, it had $950 million stock remaining under the repurchase authorization.
Fiscal 2024 Guidance
For the full year, it raised housing revenues expectation to the $6.70-$6.90 billion band from the $6.50-$6.90 billion range expected earlier. The estimated figure is up from the fiscal 2023 level of $6.37 billion. ASP is now estimated in the range of $485,000-$495,000 (up from a prior projection of $480,000-$490,000). Taking the midpoint of the guided range, the figure is up from $481,300 reported a year ago.
Assuming no inventory-related charges, KB Home now expects the housing gross margin between 21% and 21.5% (versus 21-21.4% projected earlier), down from 21.4% reported a year ago. Homebuilding’s operating margin (assuming no inventory-related charges) is now expected in the band of 11-11.4% versus 10.9-11.3% expected earlier. In fiscal 2023, it was 11.3%.
SG&A expenses, as a percentage of housing revenues, are now likely to be 10.1% compared with 10.2% anticipated earlier. It still projects an effective tax rate of approximately 23%. The company expects the ending community count to be within 250-255.
Zacks Rank
KB Home currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Recent Peer Release
Lennar Corporation LEN reported second-quarter fiscal 2024 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum.
Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.
Other Top-Ranked Peer Stocks
PulteGroup, Inc. PHM currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 15.6%, on average.
The consensus estimate for PHM’s 2024 sales and EPS implies an increase of 7.9% and 10%, respectively, from the prior-year reported levels.
Taylor Morrison Home Corporation TMHC currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 12.5%, on average.
The consensus estimate for TMHC’s 2024 sales and EPS implies an increase of 3.7% and 0.7%, respectively, from the prior-year reported levels.
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