KB Home Shares Jump as Profit Tops Forecasts

Friday, 07 Jan 2011 11:02 AM

 

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KB Home posted a quarterly profit without the benefit of tax gains for the first time in almost four years, boosted by higher margins and cost cutting, sending the builder's shares up 5 percent.

Selling, general and administrative expenses fell by more than a third, and earnings easily topped Wall Street expectations.

"The company's better-than-expected gross margin and SG&A represent solid positive surprises and should drive the stock higher today," J.P. Morgan analyst Michael Rehaut wrote in a note to clients.

Net income was $17.4 million, or 23 cents per share, for the fourth quarter, ended Nov. 30. Analysts' average forecast was 17 cents a share, according to Thomson Reuters I/B/E/S.

A year earlier, KB earned $100.7 million, or $1.31 per share, thanks to a change in tax legislation.

Housing gross margins rose to 19.1 percent from 6.8 percent a year earlier, while selling, general and administrative expenses fell by 35 percent to 55.7 million.

Orders were down 25 percent to 1,085, signaling a dip in revenue from home closings in the next few quarters, but that number is roughly in-line with builders' average 26 percent order decline in the third quarter, Rehaut said.

KB shares were up 73 cents to $15.06 in early trading on the New York Stock Exchange.

© 2014 Thomson/Reuters. All rights reserved.

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