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KB Home Reports 62% Rise in Quarterly Profit

June 26, 2002|From Reuters

Home builder KB Home on Tuesday reported a better-than-expected 62% increase in fiscal second-quarter earnings as demand for homes strengthened and selling prices rose.

Los Angeles-based KB also raised its full-year earnings outlook, citing the favorable housing market, particularly in California, and improved operating efficiencies.

"They delivered more homes than we expected [and] margins continued to expand," said David Weaver, home builder analyst for Legg Mason. "Overall, continued pricing power in most of their markets and low rates are going to help keep the housing markets, particularly for KB, very strong."

KB posted earnings of $64.1 million, or $1.42 a share, for the quarter ended May 31, well above the $1.11 average estimate of analysts polled by Thomson First Call and up from $39.5 million, or $1.07, a year earlier. Revenue grew 7% to $1.14 billion.

For fiscal year 2002, KB lifted its profit target to $6.50 a share from a previous range of $6.10 to $6.25. Analysts had forecast $6.01, according to Thomson First Call.

"This is a growth market that's driven by demographics and aging housing stock, and we consider ourselves to be focused on the best market niches, which is first-time and first-move-up buyers," Chief Financial Officer Dom Cecere said.

Backlog, or homes ordered whose sales have not yet closed, was up 8% to $2.64 billion at the end of the quarter.

KB Home shares fell $2.14 to $50.49 on the Big Board. Analysts attributed the sell-off to news of a drop in consumer confidence in June.

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