--KB Home narrowed its fiscal second-quarter loss
--Reports increased orders and sales with higher price tags
--Stock soars nearly 10% in early trading
Builder KB Home (KBH) narrowed its fiscal second-quarter loss as it reported increased orders and sales with higher price tags, overshadowing an elevated cancellation rate.
The results come as the housing industry appears to be recovering from the worst downturn in generations. Wednesday, the National Association of Realtors trade group reported that May's pending home sales measuring signed contracts matched the highest level in two years. This followed price increases seen in the closely watched S&P/Case-Shiller index.
But the performance of KB Home, which caters largely to first-time buyers, wasn't as strong as competitor Lennar Corp. (LEN, LENB), which reported this week that its second-quarter profit soared from a year earlier, boosted by a double-digit pickup in home sales and orders and a tax-related gain.
In its pre-market release, Los Angeles-based KB Home worked to reassure jittery investors as it touted "substantial improvement" in bottom-line results.
"Entering the second half of 2012, we have a strong backlog of homes with higher selling prices and better margins to help restore profitability, and we anticipate achieving further gains in our margin performance as our revenue growth and cost-management efforts take hold," Chief Executive Jeffrey Mezger said.
This helped send the stock soaring nearly 10% in pre-market trading, though it retreated and recently traded up 6.3% at $9.25. Shares of other builders also saw a boost: Hovnanian Enterprises Inc. (HOV) gained more than 4%, while Beazer Homes USA Inc. (BZH) climbed 4.6%. DR Horton (DHI), the nation's largest home builder, saw a 2% gain.
For the period ended May 31, KB Home reported a loss of $24.1 million, or 31 cents a share, compared to a year-earlier loss of $68.5 million, or 89 cents a share. The year-earlier results included a $25.7 million charge related to a valuation allowance.
Revenue rose 11% to $302.9 million. Analysts surveyed by Thomson Reuters most recently forecast a loss of 34 cents a share on revenue of $301 million.
Net orders rose 2.6% to 2,049 homes, a lower increase than some analysts had expected, though orders soared 71% from the weak first quarter.
The average selling price of $233,000 came in 9% higher than a year ago, reflecting "notable increases" of 33% in the West Coast region and 14% in the Southwest. Prices declined 8% and 1% in the Central and Southeast regions, respectively.
The company's backlog, an indication of future business, climbed 22%. Housing gross profit margin improved to 16.9% from 7.3% a year earlier.
The cancellation rate edged up to 26% from 25% a year earlier, indicating a fair number of deals aren't making it the closing table. Lennar's cancellation rate was 16%.
The builder ended the quarter with total cash and cash equivalents of $377.4 million, much of it unrestricted.
Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com
(END) Dow Jones Newswires
June 29, 2012 09:05 ET (13:05 GMT)
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