KB Home widens Q2 loss on weak sales and falling prices

Filed under: Earnings reports, KB HOME (KBH), Housing

On Thursday, home builder Lennar Corp. (NYSE: LEN) said that its fiscal second-quarter loss narrowed, as Wall Street had expected. KB Home (NYSE: KBH), on the other hand, reported Friday a larger-than-expected second-quarter loss due to weak sales and falling home prices, as well as write downs.

For the quarter ended May 31, Los Angeles-based KB Home reported a loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million, or $1.93 per share, in the same period of the previous year. This includes a charge of $176.5 million against unsold homes and to abandon some land option contracts.

Revenue tumbled 55% to $639.1 million, driven by lower housing and land sales. Analysts polled by Thomson Financial had expected a loss of 94 cents per share on revenue of $691.3 million.

As of Might 31, KB Home’s backlog of homes yet to be delivered was 6,233 units, down 54% percent from the same quarter last year. Unit deliveries, meanwhile, fell 41% to 2,810 as the company attempted to scale back its inventory of homes on the market.

KB Home stated its cancellation rate was 27%, down from 34% in the year-ago period and 53% in the first quarter, but new orders during the quarter fell 42% from a year ago to 4,200.

And the average selling price of the builder’s homes slipped 17% during the quarter to $226,600.

While Lennar warned in its earnings release Thursday of continuing deterioration in the housing market through the rest of the year, KB Home predicted that falling home prices would prompt reluctant home buyers to “become a healthy source of demand for new homes, fueling the eventual housing market recovery.”

Shares of KB Home fell 7.5% to $16.77 in morning trading on Friday. The share price has fallen 33.2% in the past three months, and is down 57.5% from a year ago.

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This entry was posted on Friday, June 27th, 2008 at 4:15 pm and is filed under Real Estate and Housing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.