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says demand for new houses stayed healthy throughout its second quarter, but that didn’t stop its stock from sliding. Shares were 6.4% lower the afternoon after the California-based builder disclosed its earnings.
KB Home is still benefiting from “strong market conditions,”
Jeffrey Mezger,
KB Home’s chairman, president, and CEO, said on a call with investors, according to a Sentieo transcript. The dynamic of low supply and high demand for housing has contributed to rising prices for both existing and new homes.
“We delivered healthy results in the second quarter, marked by one of the strongest quarters for both operating and gross margin performance in some time,” Mezger said, praising the company’s management of supply-chain challenges. Shortages of building materials were widespread earlier this spring, according to a National Association of Home Builders survey.
Wednesday evening, the company reported second-quarter diluted earnings of $1.50 per share, while analysts were expecting $1.33, according to FactSet. Revenue was $1.44 billion, less than the $1.48 billion Wall Street had penciled in, marking the second quarter in a row that revenue was lower than expected.
In a note, BTIG analyst Carl Reichardt said the company’s outperformance in per-share earnings was driven by its gross margin and reduced selling, general, and administrative expenses. “All in, we view this as a good quarter highlighted by a robust order print, though guidance suggests backlog remains stuck in the field given production delays,” Reichardt wrote. The analyst rates KB Home’s shares at Neutral.
Softer-than-expected financial forecasts likely contributed to the shares’ dip following earnings, Wedbush analyst Jay McCanless wrote in a note. On the call, KB Home said it anticipated third-quarter revenue in the range of $1.5 to $1.58 billion.
“Current sales activity is apparently less frenetic than earlier this year but management is still limiting sales and raising prices to keep orders from outstripping the construction capacity,” McCanless wrote. The analyst rates the company’s shares Outperform, with a price target of $56.
Demand for a home is still high, said Mezger on the call. “As we’re releasing lots for sale today, at the higher prices per phase release, we’re not seeing a tapering in demand,” he said. “It may be off a little bit from the strength it was in March, but in March, it was really, really strong.”
