Homebuilder loses $3.47 per share in fiscal first quarter due to $223.9M in writedowns tied to plunging home prices; shares tank.
Last Updated: March 28, 2008: 10:48 AM EDT
NEW YORK (AP) -- Shares of KB Home plunged Friday morning after the homebuilder posted a wider-than-expected loss for the first quarter.
Soleil Securities Group analyst Anna E. Torma said KB Home's results did not bode well for the coming quarter and were well below her estimated loss of $1.96 per share.
"Results indicated deteriorating conditions for KBH, with no indications of a spring selling season," Torma said in a client note. Torma left her "Hold" rating unchanged.
JPM Securities analyst James F. Wilson was also downbeat on KB's earnings, saying its per-share loss exceeded his own forecast as well.
He noted that the company said its new home orders were down "substantially," especially on the West Coast and in the Southeast.
Earlier Friday, KB Home said it lost $268.2 million, or $3.47 per share, in the fiscal first quarter due to a large write-down resulting from lower home prices. In the same quarter last year, the company reported a profit of $27.6 million, or 34 cents per share.
Latest results were well below Wall Street estimates of a loss of $1.17 per share for the quarter.
Shares of KB Home (KBH, Fortune 500), based in Los Angeles, slipped 86 cents, or 3.3 percent to $24.93 Friday morning.
Host of factors push down prices. Jeffrey Mezger, KB Home's president and chief executive, said a growing supply of unsold new and existing homes on the market, tight mortgage lending and industrywide discounting drove down sale prices and compressed margins during the quarter.
That forced the builder to take impairment charges and walk away from land option contracts.
"Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand," Mezger said in a statement. "We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve."
KB's unit deliveries fell 43% to 2,928, and the average selling price dropped 7% to $248,200.
Net orders plunged from a year ago. Net home orders totaled 1,449, down 75% from 5,744 net orders a year earlier. The sharp decline came as KB took steps to consolidate or pull out of some markets.
The cancellation rate was 53%, up from 34% in the year-ago quarter but down from 58% in the fourth quarter.
The company's backlog, or homes under contract yet to be delivered, fell during the quarter. As of Feb. 29, the figure stood at 4,843 units, down 57% from 11,183 units at the close of the same quarter last year.
KB was the latest builder to report a loss in the first quarter.
On Thursday, Miami-based Lennar Corp. (LEN, Fortune 500) reported a loss of $88.2 million, or 56 cents per share, in the three months ended Feb. 29 compared with profit of $68.6 million, or 43 cents, in the year ago quarter.
KB Home reported declines in sales, average selling price, home deliveries and new home orders during the quarter.
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