KB Home KBH plunged to a new 52-week low of $9.77 on Jan 8. Share of the Los Angeles, CA-based homebuilder declined 15% after it reported disappointing fourth-quarter and full-year 2015 results the previous day before market opened.
Details of the Quarter
KB Home missed the Zacks Consensus Estimate for both sales and earnings in the fourth quarter. The quarterly results were hurt by construction delays due to unfavorable weather conditions and trade labor shortages in certain markets. These headwinds resulted in lower-than-expected home deliveries and revenues.
Though adjusted earnings of 43 cents per share increased year over year, it missed the Zacks Consensus Estimate of 51 cents by 15.7%.
Total revenue of $985.8 million lagged the Zacks Consensus Estimate of $1.07 billion by 8.2%. Revenues, however, jumped 23.8% from the year-ago period.
In the reported quarter, homebuilding revenues increased 23.9% year over year driven by an increase in average selling prices (ASP) and improvement in home closings.
Housing revenues of $979.8 million rose 25% from the year-ago period, but fell short of the guidance range of $1.04–$1.10 billion.
Number of homes delivered was lower than expected despite increasing 16% year over year. This was because of unfavorable weather in September and early October in the central region. In addition, the company faced labor shortages, which delayed construction.
ASP of homes delivered rose 8% year over year to $379,800, exceeding management’s expected range of $374,000 to $378,000. Net orders rose 10% driven by a higher average community count and demand growth in the markets served by KB Home.
Adjusted homebuilding gross margin decreased 50 basis points year over year to 22.2% and fell below management’s expectations. The decline was due to revenue shortfall and resulting lower operating leverage, caused by unfavorable weather and shortages in subcontractor.
KB Home currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Investors interested in the construction sector may consider CalAtlantic Group, Inc. CAA, Louisiana-Pacific Corp. LPX and Owens Corning OC. All the three stocks carry a Zacks Rank #2 (Buy).
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