KB Home (KBH) recently announced the opening of ten new energy-efficient communities under its Built to Order program, all located in and around the highly demanding Bay Area of San Francisco. Six of the new communities are already on sale while the remaining four are scheduled in early autumn.
A depressed housing industry is the biggest concern for any homebuilder including KB Home. Besides, there is no sign of a speedy recovery. Home sales declined consistently in each of the first three months of the year. The situation is feared to deteriorate further. Moreover, a lack of geographic diversity signifies that the company is heavily exposed to fluctuations in certain key markets.
In addition, house prices also plunged continuously, driven by an excess of supply over demand and tough competition from resale homes, foreclosed homes, short sale homes and rental housing.
However, the company’s constant effort to redesign and upgrade its existing product lines is worth mention. It is also aggressively buying lots with a view to expand and improve its business in fiscal 2011 and beyond. KB Home also purchased 180 lots in the eastern parts of Austin, expecting a strong demand for homes in the region.
In the last reported quarter, KB Home's adjusted net loss stood at $33.3 million or 43 cents per share much wider than the Zacks Consensus Estimate of a loss of 32 cents per share. Total revenue fell 27% to $271.7 million, mainly driven by a 28% decline in housing revenues to $270 million. net orders fell 11% to 1,998 homes from 2,244 homes a year ago.
As of May 31, 2011, the company’s backlog totaled 2,422 homes, a decline of 24% from 3,175 homes in the year-ago period. Potential housing revenues from backlog fell 23% to $501.5 million as of May 31, 2011 from $648.2 million as of May 31, 2010, primarily due to the lower number of homes in backlog.
Thus, keeping these in mind, the shares of KB Home are maintaining a Zacks #4 Rank, which translates into a short-term Sell rating.
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