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Builder KB Home sees rising profit, revenue amid recovery

September 24, 2013|By Andrew Khouri
  • A KB Home development going up this year in Lancaster. The builder reported higher revenue and profit for the third quarter.
A KB Home development going up this year in Lancaster. The builder reported… (Anne Cusack, Los Angeles…)

Los Angeles  builder KB Home rode the housing recovery to soaring revenue and profit during the third quarter, as it sold more homes at higher prices.

The Southland’s largest production home builder beat Wall Street’s profit expectations Tuesday, reporting net income of $27.3 million, or 30 cents per share,  in the third quarter. That’s up remarkably from $3.3 million, or 4 cents per share during the same period last year.

Revenue climbed 29% over the year to $549 million, as each of the company’s regions — the West Coast, Southwest, Central and Southeast — brought in at least 25% more in revenue.  Still, analysts followed by Yahoo Finance expected more, $569.6 million in revenue.

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"The fundamentals of the current housing recovery are firmly in place, supported by low inventory levels, an improving economy and positive demographic trends," KB Chief Executive Jeffrey Mezger said in a statement.

Home prices have risen rapidly this year as traditional buyers and deep-pocketed investors have competed over few available homes, fueling bidding wars and pricing some would-be buyers out of the market.  That’s also made new home construction more attractive, although builders have yet to ramp up production to historically normal levels.

Home builder Lennar Corp. also posted strong gains Tuesday. The Miami builder reported revenue climbed 46% over the year to $1.6 billion in the third quarter, while net income rose nearly 39% to $120.7 million.

KB’s average sales price reached $299,100, 22% higher than the third quarter of last year.  The company sold 6% more homes, as sales rose in all regions.

But net orders fell 8.6% over the year, a sign that higher mortgage rates might be affecting demand.

“We believe that the recent slower pace of the recovery caused by an uptick in mortgage interest rates is a temporary effect, and we expect to see steady upward demand for housing as consumers adjust to both higher rates and pricing,” KB CEO Mezger said.

KB’s stock was up 4.4% to $17.78 in late morning trading.


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