KB Home's Third-Quarter Earnings: What You Need to Know

Shares of KB Home (NYSE: KBH  ) are surging today after the homebuilder reported better-than-expected third-quarter earnings. For the three months that ended August 31, the nation's fifth largest homebuilder by volume said its total revenue rose by 29% and that its operating earnings more than tripled compared to the same period last year.

"The momentum we have built in our business continued to fuel our financial performance in the third quarter as we generated strong revenue, net income and earnings per share results," said Jeffrey Mezger, president and chief executive officer. "We are clearly seeing meaningful top-line and bottom-line benefits from our strategy of investing in attractive land positions across the country, primarily targeting locations with limited housing inventory and higher household incomes."

The market's reaction to the results, however, has masked underlying weaknesses in the data. As you can see in the table below, while deliveries improved by 6.1% over the third quarter of 2012, new sales orders and backlog fell, both of which are tangible leading indicators of future performance.

Metric

3Q13

3Q12

Change

New sales orders

1,736

1,900

(8.6%)

Deliveries

1,825

1,720

6.1%

Backlog

3,039

3,142

(3.3%)

Source: KB Home.

This same trend was evident when PulteGroup (NYSE: PHM  ) and Beazer Homes (NYSE: BZH  ) reported their most recent round of earnings. PulteGroup saw its new orders fall in the second quarter by 12% compared to the previous year. And Beazer said that new orders and backlog dropped by 11.2% and 2.6%, respectively, on a year-over-year basis.

KB Home explained its own results by noting the 3% decrease in backlog "primarily reflected a 9% year-over-year decline in the Company's third quarter net orders." And it sought to deflect attention away from the drop in new order volume by focusing investors' attention on new order value, which has benefited greatly from the recent surge in home prices. Measured by dollar value -- again, as opposed to unit volume -- new orders grew by 7% over the year-earlier quarter.

3 stocks that will help you retire rich
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "
3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2652332, ~/Articles/ArticleHandler.aspx, 10/1/2014 4:14:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement