KB Home posts narrower loss, and shares pop
KB Home
The No. 5 U.S. homebuilder said on Friday its net loss narrowed to $58.1 million, or 75 cents per share, in the first quarter ended February 28 versus $268.2 million, or $3.47 per share, a year earlier.
Analysts had forecast a loss of 87 cents per share, according to Reuters Estimates.
KB's orders rose 26 percent to 1,827 in the quarter, fueling the rise in the share price, said FBN Securities analyst Joel Locker.
The company's aggressive actions, which result in reconfiguring its product lines to a lower price point, were bolder than those of most of its peers, resulting in the healthy order increase, wrote JP Morgan analyst Michael Rehaut in a note to clients.
The company sees sequential growth in its net orders through 2009, Chief Executive Jeff Mezger said during a conference call with analysts.
The shares were up $1.48 or 10.5 percent at $15.64 in midday trading on the New York Stock Exchange in contrast with a much smaller rise of about 0.7 percent on the Dow Jones U.S. Home Construction Index <.DJUSHB>.
Pretax, noncash charges for inventory, joint venture impairments and land option contract abandonments fell 86 percent to $32.3 million.
Homebuilders have been mired in a protracted downturn, triggered by rampant risky lending practices and exacerbated by rising unemployment associated with the recession.
But recent relatively positive pieces of data, such as the 4.7 percent rise in new home sales reported this week, has generated a fragile sense of optimism among both builders and investors. The Dow Jones U.S. Home Construction Index is up about 52 percent since March 6.
We are seeing some signs that the housing market is functioning according to fundamental economic principles, Mezger said during the call. As a result of low prices and low interest rafts, buyers have become more active.
On the other hand, KB's revenue fell 61 percent to $307.4 million, and Mezger said the company does not see any meaningful improvement in market conditions for the remainder of the year.
(Reporting by Helen Chernikoff; Editing by Gerald E. McCormick, Dave Zimmerman)
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