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KB's Earnings, New Orders Up in Quarter

Home builder continues to benefit from strong demand and low interest rates. Profit, topping estimates, climbs 27%.

June 20, 2003|Bonnie Harris | Times Staff Writer

KB Home Corp., continuing to benefit from ultra-low mortgage rates and strong demand for new homes, reported Thursday that its fiscal second-quarter profit rose 27% and that orders received in the period were up sharply.

The Los Angeles-based company, one of the nation's largest home builders, said new projects in its West Coast and Southeast regions helped push orders up 17%, to 8,397, in the three months ended May 31 from a year earlier. Its order backlog at the end of the quarter was the highest in its history, the company said.

KB Home, which focuses on building affordably priced houses for first- and second-time buyers, said it earned $81.4 million, or $1.94 a share, in the quarter. That was up from $64.1 million, or $1.42 a share, in the same quarter a year earlier.

Revenue rose 26% to $1.44 billion from $1.14 billion.

The earnings exceeded analysts' expectations of $1.64 a share, according to Thomson First Call.

On Thursday, KB raised its earnings estimate for the full fiscal year by 20 cents, to $8.20 a share.

James F. Wilson, a housing industry analyst at JMP Securities in San Francisco, said KB's strategy of catering to entry-level buyers and first-time owners who are trading up has worked especially well at a time when interest rates are at record lows and few rivals are offering comparable products.

"They're on solid ground," Wilson said.

KB's average selling price overall rose 15% to $212,200 in the second quarter, compared with $184,300 the year before. Its average sale price in the West Coast jumped to $356,400, from $299,800.

The firm operates in nine states, with California as its largest and most profitable market.

"We expect to continue to benefit from favorable housing market conditions, including the combination of healthy demand and constrained land supply," KB Chief Executive Bruce Karatz said.

KB Home announced its earnings after the close of trading on the New York Stock Exchange, where its shares closed at $69.95, up 59 cents. In after-hours trading, KB's shares fell $1.25.

Wilson said he wasn't sure what caused the decline but noted that some investors may have been expecting KB to boost its full-year earnings estimate by more than 20 cents, given that its second-quarter results beat estimates by 30 cents. Company officials weren't available Thursday to comment but have scheduled a conference call for today.

KB's stock has risen almost 40% in the last 30 days.

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