Today's stock market
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Energy shares soared on rising crude oil prices and the news that the U.S. is now a net exporter of natural gas for the first time since 1957. The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) closed up 2.5%. Retail stocks were also strong, with the SPDR S&P Retail ETF (NYSEMKT:XRT) rising 2.5% to a 52-week high.
KB Home builds a good quarter, expects a strong 2018
Homebuilder KB Home continued its recent string of surprisingly strong quarterly reports when it announced earnings last night, and the market sent shares up 12.4%. Revenue in Q4 rose 18% to $1.40 billion and earnings per share more than doubled to $0.84 from $0.40 in the quarter last year. Analysts were expecting EPS of $0.77 on sales of $1.36 billion.
Deliveries grew 9% to 3,340 homes and average selling price rose 8% to $416,500. Gross margin expanded to 18.1% from 16.5% last year. Net order value rose 9% to $935 million, thanks largely to price increases in a strong market in the areas of the country the company operates. The number of home orders grew 2% and backlog was up 9% to $1.66 billion on a flat number of homes.
Looking forward, KB Home officials sounded an optimistic note. "As we look to 2018, we expect conditions will remain favorable in most of our served markets, with solid demand for housing driven by healthy employment, rising household incomes and strong consumer confidence, and continued limited supply," said Chairman and CEO Jeffrey Mezger in the press release.
Taxes were a hot topic of conversation in the conference call. Despite the fact the company will need to take a $115 million non-cash charge in the first quarter, KB Homes officials think the company will get a double benefit from the tax bill. The company's tax rate should decrease from 37.7% in 2017 to 27% in 2018, driving higher profits and cash flow. The company also thinks that higher after-tax monthly income will stimulate stronger demand from home buyers.
Progress Software moves ahead
Progress Software, a mid-cap provider of software development tools to enterprise customers, beat analyst expectations for Q4 with a profit gain on a small decline in revenue, and shares soared 15.8%. Revenue fell 1% to $116 million and non-GAAP EPS rose 8% to $0.67. Analysts were expecting revenue of $114 million and earnings of $0.61 per share.
For the full year, Progress Software had a 2% decline in revenue and a 16% increase in EPS, thanks to some serious cost-cutting. The company had also beat estimates for the previous quarter and raised guidance.
"We delivered on our commitment to operate our business efficiently, exceeding our cost-savings targets by reducing our total expenses by over $30 million," said CFO Paul Jalbert in the press release.
Little-followed Progress Software has had flat revenue for years, but is trying to turn that around with some key acquisitions in machine learning and back-end systems. The company makes tools for enabling large customers to build cloud-based and on-premise, mission-critical applications, and it now hopes to establish a leadership position in a platform for building cognitive, predictive apps. Progress Software faces stiff competition from major players, but investors today seemed to think that it's showing signs of living up to its name.