You knew that KB Home (NYSE:KBH) was building something good. When the homebuilder announced that it experienced a 27.4% spike in stateside orders for new homes during its May quarter, it was just a matter of waiting to see how much of that goodness would trickle down to the bottom line.
Naturally, you will still have to wait on that front. That's the beauty of the homebuilder. The company now has a $4.5 billion backlog in new home orders. Last night, the company reported a healthy $2.40 a share in second-quarter earnings on $1.6 billion in revenues. The backlog, at nearly three times the past three months of sales, is reassuring in that it promises healthy quarters over the next few reporting periods.
But like a camel hoarding water, one has to wonder about the shelf life of that backlog. With interest rates poised to climb over the next few months, one has to wonder if the end of cheap financing will hurt KB Home's future home orders once its latest contracts close.
The weaker players like Dominion Homes (NASDAQ:DHOM) are already buckling. However, the market leaders like KB Home, D.R. Horton (NYSE:DHI), and Pulte Homes (NYSE:PHM) are thriving. So even if the fundamentals begin to dim, those that are faring well today can hold up just fine by claiming market share organically or by acquiring struggling rivals.
So KB Home growing the value of its backlog by 32% -- even though it grew its top line this past quarter by just 9% -- is great news in the near term. The sector is drawing the line wider between the winners and losers. And that's even better news for KB Home in the long term.
Has our Home Center inspired you to make the move or fix up your present homestead? Why are there so many home makeover shows on television these days? Is it really that easy? Share your thoughts with other Fools on the Building/Maintaining a Home discussion board.
Longtime Fool contributor Rick Munarriz wants to know if the KB in KB Home stands for "kickin' butt." He does not own shares in any of the companies mentioned in this story.
