KB Home, the No. 5 U.S. home builder, posted a quarterly net loss on Thursday, partly on land value-related charges that reflect the continuing decaying U.S. housing market.
KB Home said the results reflected an oversupply of new and existing homes, aggressive competition and weak demand. It said it could not provide a full-year earnings forecast or predict when market conditions may improve.
Housing affordability challenges and tighter credit conditions in the subprime and near-prime mortgage market have also exacerbated current market dynamics, keeping prospective buyers out of the market, slowing the absorption of excess supply and further delaying a housing market recovery, Jeffrey Mezger, president and chief executive, said in statement.
KB Home reported a net loss of $148.7 million, or $1.93 per share, including discontinued operations in France, for its second quarter, ended May 31, compared with a year-earlier profit of $205.4 million, or $2.45 per share.
Revenue, excluding its soon-to-be-sold 49 percent stake in its French unit Kaufman & Broad SA, fell 36 percent to $1.41 billion. The sale is expected to close in the third quarter and generate gross proceeds of $800 million.
Analysts, on average, were expecting far higher revenue of $1.76 billion, according to Reuters Estimates.
The company joined Lennar Corp., the second-largest U.S. home builder, in reporting a quarterly loss this week due to the steep downturn in the U.S. housing market.
The market has been pressured for more than a year in many areas due to high prices and rising interest rates that have deterred buyers and forced some real estate speculators to retreat. Earlier this week, the government reported that U.S. home sales fell 1.6 percent in May.
Home-builder CEOs, from Lennar's Stuart Miller to Toll Brothers Inc.'s Robert Toll, have said the housing market most likely would not improve this year and could decay further.
Home-building revenue fell 41 percent to $1.30 billion, as the number of homes sold declined 36 percent to 4,776 and the average selling price was down 8 percent at $271,600.
KB Home reported a loss from continuing operations of $174.2 million, or $2.26 per share, largely due to a pretax charge of $308.2 million from a write-down in ventures impairments and write-offs of down payments on options for future land purchases.
In a research note, JP Morgan analyst Michael Rehaut wrote: While disappointed by the magnitude of the charges, we are not surprised given Lennar's second-quarter charges of $329 million reported earlier this week.
The charges came from price cuts in housing markets across the United States in the spring selling season, KB Home said. Depressed land prices due to market conditions also led to some project cancellations.
Bank of America Securities analyst Daniel Oppenheim said he expects KB to report additional land charges in future quarters as prices fall.
Net orders for new homes were off 3 percent at 7,265 because of a sharp drop in the central region. That was a substantial improvement over the previous three quarters.
The company's cancellation rate was 34 percent, essentially unchanged from the prior quarter.
KB Home shares were down 10 cents at $40.33 in midday trading on the New York Stock Exchange trade. The stock, which hit a nine-month low on Wednesday, is down 21 percent this year, while the Dow Jones U.S. Home Construction Index, a yardstick that measures home builder performance, is off 25 percent.