KB Home released its 2015 second quarter results this morning, and it beat expectations with both orders and gross margins.
“We expect a positive reaction by the stock today, as while EPS was roughly in-line with the street consensus and our estimate excluding a tax benefit, at the same time, we believe orders were above expectations as well as our estimate, while moreover, gross margins were modestly above guidance and we believe investor expectations,” J.P. Morgan’s Michael Rehaut wrote this morning.
Here are some of the takeaways:
- Orders grew 33%;
- Community count grew 33%;
- Total revenues grew 10% to $623.0 million;
- Housing revenues rose 8% to $604.9 million;
- Average selling price of homes delivered advanced 6% to $338,500; and
- Gross profit margin of 16.0% decreased 290 basis points from the year-earlier quarter (but it improved 90 basis points from the first quarter of 2015).
“The year-over-year decline in the housing gross profit margin was primarily due to higher land and construction costs, increased pricing pressure in certain markets, start-up field costs associated with new community openings, and an increase in the amortization of previously capitalized interest,” KB said in a news release.
The Southwest, Southeast, West and Central regions all saw improvement, rising 152%, 38%, 32% and 8%, respectively. Interestingly, the company enjoyed a $0.02-share bump from federal energy tax credits.
“The company expects “measurable YOY earnings growth in 2H15” as well as “further sequential margin improvement”, which is in-line with its guidance from last quarter. Overall, we continue to rate KBH Neutral, as while the company has demonstrated solidly below average gross margins over the last few quarters…,” Rehaut wrote.
UBS’s Susan Maklari said results came in “largely as expected”