Earnings Preview: KB Home


KB Home (KBH), one of the leading homebuilding companies in the U.S., is set to unveil its second quarter 2012 results on June 29, 2012, before the start of trading. The Zacks Consensus Estimate for the second quarter is loss of 36 cents (estimated year-over-year increase of 60.0%) on revenues of $300 million (year-over-year increase of 10.3%).

First Quarter 2012 Recap

KB Home reported adjusted net loss per share (excluding inventory impairment charges) of 51 cents in the first quarter of fiscal 2012, wider than the adjusted loss (excluding inventory and impairment charges and a loss on loan guarantee) of 47 cents per share in the year-ago quarter.

Lukewarm revenues and gross margins led to the wider loss in the quarter. The loss was far more than the Zacks Consensus Estimate of 23 cents per share.

Total revenue increased 29% year over year to $254.6 million, propelled by housing revenues. However, total revenue was much below the Zacks Consensus Estimate of $324.0 million as well as the prior-quarter revenue of $479.9 million due to declining net orders.

Agreement of Estimate Revisions    

In the last 7 days, none of the 14 estimates have been revised either for the second quarter or full year 2012. However, over the last 30 days, 2 out of 14 estimates have been changed for the second quarter of 2012. One of the revisions has been made downward and the other has been made upward.

However, 2 of the 14 estimates for fiscal 2012 have moved in the downward direction in the last 30 days.

The mortgage financing issues, that significantly hurt the company’s first quarter results, are expected to hurt net orders and backlog conversions at least for the next 2-3 quarters. This might have pushed some estimates in the downward direction.

Magnitude of Estimate Revisions

Given the limited estimate revisions, the consensus estimate for the second quarter of fiscal 2012 has remained static over the last 7 as well as 30 days at a loss of 36 cents. However, the consensus estimate for fiscal 2012 has declined by a cent to a loss of $1.04 per share during the last 30 days but has been static for the past 7 days.

Surprise History

KB Home has surpassed the estimates in two of the last four quarters while missing it in the first quarter of 2012 and second quarter of 2011. On an average, the surprise was a 55.92% in the trailing four quarters.

Our Recommendation

We currently have a Neutral recommendation on KB Home. The stock carries a Zacks #3 Rank (a short-term Hold rating).

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