Home builder KB Home missed expectations for its most recent quarter, thanks to softer-than-expected deliveries and inventory-impairment and contract-abandonment charges, though sales continued to reflect a recovering housing market.
The Los Angeles builder reported a 24% rise in overall revenue to $985.8 million and posted another quarter of double-digit gains in new orders and deliveries. The average selling price of a KB home rose 8% from a year earlier, as prices climbed across each region.
"Demand is pretty good out there right now," said Chief Executive Jeffrey Mezger in an interview. With traffic at pre-housing-crisis highs and the value of homes in backlog surging over the quarter, "market conditions are pretty good," he said.
Larger rival Lennar Corp. expressed similar sentiment when it logged another round of solid results in its year-end quarter.
Still, KB's fiscal fourth-quarter deliveries disappointed. Though they were up 16% from a year ago, "we missed on deliveries," said Mr. Mezger, pointing to adverse weather and what has been a continuing labor shortage in the housing industry.
Heavy rains halted construction for a slice of the quarter across Texas and Colorado, and a constraint on the company's subcontractor base meant KB wasn't able to fully complete by quarter-end work that was delayed by weather.
For the quarter ended Nov. 30, KB reported a profit of $44 million, or 43 cents a share, down from $852.8 million, or $8.56 a share, a year earlier. Last year's results included a large gain stemming from a reversal of a reserve against losses incurred during the housing crisis. In the latest quarter, the company took a tax hit on that gain.
Analysts surveyed by Thomson Reuters projected an adjusted profit of 50 cents a share on $1.07 billion in revenue.
The lower-than-expected deliveries shaved three cents a share from the company's bottom line. Some $5.1 million of inventory-impairment and land option contract-abandonment charges reduced per-share earnings by another five cents, the CEO said, and those charges pressured gross margin.
The builder's housing gross margin edged down slightly from a year earlier to 17.2% and fell short of the 18% the Mr. Mezger had suggested on last quarter's conference call. Better-than-expected overhead expense management kept operating margin steady.
For the current quarter, ending in February, Mr. Mezger reiterated that gross margin will likely slip to the 16% range as the quarter--ahead of the spring selling season--is seasonally the company's weakest.
Write to Lisa Beilfuss at email@example.com
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