Developers and Construction

KB Home Reports Wider Loss, and Shares Skid

Posted on Monday, July 4, 2011

KB Home reported a wider-than-expected quarterly loss as margins and homes prices fell and write-downs of land values rose.
Shares of KB, which has operations in nine states, were down 15 percent, or $1.84, to $10.08 a share.
This summer is the fifth anniversary of the housing slump, which followed years of rampant risky lending and speculation.
Builders of new homes have tried to compete with the lower prices of used houses and foreclosures by building on cheaper land. But KB’s second-quarter results show the company may have overpaid for the land it is building on now, which hurt its margins in the quarter, said Joel Locker, an analyst at FBN Securities. “They thought pace and price would be better by now,” Mr. Locker said.
KB recorded $20.6 million in charges in the quarter to write down the value of land. That reduced earnings by 15 cents a share, a UBS analyst, David Goldberg, said in a note to clients, far more than he and other analysts expected.
According to the widely watched S.&P./Case-Shiller home price index released on Tuesday, home prices in 20 cities fell 4 percent year-over-year in April. Economists cautioned that home prices will most likely continue to crawl along at low levels, and could fall further, as the battered housing market works through headwinds like foreclosures that are depressing prices and weak demand due to low consumer confidence.
KB said it lost $68.5 million, or 89 cents a share, in its second quarter ended May 31, compared with a loss of $30.7 million, or 40 cents a share, a year earlier.
Analysts had anticipated a loss of 31 cents a share, according to Thomson Reuters.
Also included in KB’s quarterly results was a loss of $14.6 million to Inspirada, a bankrupt housing community near Las Vegas. Ultimately, the company will pay lenders $214 million to $225 million to settle related legal claims. Once expected to have about 11,500 homes, the project stalled as the Las Vegas housing market collapsed.

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