Driven by higher selling prices and deliveries, KB Home (KBH) revealed stronger-than-expected sales on Thursday, however its shares fell deep into the red as investors digested a 44% decline in profit.
Shares of KB Home fell nearly 6% to $15.70 in recent trade.
The Los Angeles homebuilder reported a profit of $7.72 million, or 10 cents a share, down from $13.9 million, or 18 cents a share. Excluding one-time items, KB Home said it earned 10 cents, beating average analyst estimates in a Thomson Reuters poll by three pennies.
Revenue for the three months ended Nov. 20 climbed 20% to $578.2 million from $479.9 million, topping the Street’s view of $567.1 million.
KB Home said average selling prices increased 14% to $270,700 during the quarter and deliveries grew 6% year-over-year to 2,122 homes. Orders, however, increased by just 4%, weaker than the double-digit growth reported by rivals.
“We increased our deliveries and generated solid top-line growth, a higher housing gross profit margin and continued improvement in our selling, general and administrative expense ratio, all of which translated to higher homebuilding operating income,” KB Home CEO Jeffrey Mezger said.
The company also benefited from improved housing market conditions and growing demand for larger homes with more design options, which in part helped drive selling prices higher.