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KB Home Profit Increases 20%

The company sells more houses at wider margins. It raises its forecast for this year and next.

September 21, 2004|Annette Haddad | Times Staff Writer

Selling more houses at wider margins helped push KB Home's profit up 20% in the fiscal third quarter and prompted the Westwood-based company to raise its guidance for this year and next.

One of the nation's largest home builders, KB Home said Monday that it earned $117.9 million, or $2.84 a share, compared with $97.8 million, or $2.33, a year earlier. The results easily beat the $2.73-a-share consensus of analysts surveyed by Thomson First Call.

Revenue for the period ended Aug. 31 rose 22%, to $1.75 billion. KB, which builds mostly moderately priced homes in the West, Central and Southeast regions of the U.S. as well as in France, said deliveries rose 17% to 8,041 homes. The average sales price rose 5% to $214,400.

On the West Coast, KB's deliveries were flat, though the average price of a home sold in the region rose 16% to $407,900 in the quarter, while net new orders rose 8% to 1,526.

Overall, KB said net orders rose 23% to 8,982.

The company's backlog -- a key measure of future sales and earnings -- was the highest in its history at the end of the quarter, rising 42% to $4.8 billion from the same year-earlier period. The number of units on backlog rose 32% to 16,572.

The rosy financial performance, coupled with a bullish outlook for the economy, prompted KB to raise its previous estimate for 2004 earnings to $11 a share and issue initial guidance for 2005 of $14. Both were above Wall Street forecasts.

The record backlog is helping KB to "operate from a great vantage point as we move forward," Chief Executive Bruce Karatz said in a statement, noting that the company controls 160,000 lots in key U.S. markets where land is becoming constrained.

KB released its earnings after the market close. In after-hours trading, KB shares rose 1.3% to $77.20 after closing down 96 cents at $76.25 on the New York Stock Exchange.

Another big home builder reporting higher earnings Monday was Lennar Corp. The Miami-based company, which purchased Santa Clarita-based Newhall Land & Farming Co. this year, said it earned $225.2 million, or $1.36 a share, compared with $201.6 million, or $1.21 a share, a year earlier. The results beat analysts' expectations. Sales rose 21% to $2.7 billion.

Lennar said that orders fell 2% in the three months through August as Hurricane Charley and an approaching Hurricane Frances cut into sales.

In its West Coast region, orders fell 6%. Still, backlog at the company was up 14% from a year earlier.

Lennar shares fell 9 cents to $61.92, also on the NYSE.

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