KB Home (KBH) capped its fiscal year with the first quarterly profit since 2007, thanks to a change in federal tax laws, and said it expects to turn a profit this year.
KB Home sold 8,341 homes during the 12 months ended in November, and forecasts sales of between 8,000 and 9,000 homes this year.
The company's new orders, however, rose just 12 percent in the fourth quarter compared to the year-earlier period. That disappointed investors who were anticipating that KB Home, which caters to first-time buyers, would get a bigger lift from a federal tax credit for new owners.Shares of KB Home fell 4 percent, or 66 cents a share, to close at $15.72 Tuesday.
CEO Jeffrey Mezger explained the company, which builds homes to order, was at a disadvantage last fall because buyers racing to qualify for the tax incentive favored already built homes. The company plans to prepare more home sites in advance this spring as the April 30 tax credit deadline nears.
"We will have some type of strategy to avoid the situation we were in last fall," Mezger said.
Homebuilders have seen an increase in demand in recent months due to low interest rates and an $8,000 tax credit for first-time home buyers. Buyers rushed to take advantage of the incentive before the end of November, when it was set to expire. But Congress extended the deadline through April and added a $6,500 tax credit for move-up buyers.
But recent figures raised doubts about how strong demand will be in the coming months.
New homes sales tumbled 11 percent in November from October to the lowest level since last spring. The number of people preparing to buy a home in November also dropped.
Mezger said that it looks like home prices may be stabilizing in some areas of California and Texas, while parts of Florida, Nevada and the Carolinas are still seeing declines.
"It remains particularly challenging to forecast the 2010 housing market," Mezger cautioned.
KB Home earned $100.7 million, or $1.31 a share, in the three months ended Nov. 30. That included a tax gain of $191.7 million. On a pretax basis, KB Home lost $91 million as it abandoned land contracts and wrote down the value of joint ventures and inventory. In the fourth quarter of 2008, the builder lost $307.3 million, or $3.96 a share.
Revenue dropped to $674.6 million from $919 million in the prior year.
Analysts polled by Thomson Reuters expected a loss of 42 cents a share on revenue of $577.8 million.
The Los Angeles-based company has operations in 10 states and was ranked the nation's fifth-largest homebuilder in 2008 by Builder magazine.
For the year, KB Home lost $101.8 million, or $1.33 per share, compared to a 2008 loss of $976.1 million, or $12.59 per share.
Yearly revenue dropped to $1.82 billion from $3.03 billion in 2008.
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