Home builder KB Home (KBH) is scheduled to announce its first-quarter results before the market opens on Friday. The nation's homebuilding industry has been struggling for several months and the general scenario is extremely difficult for KB Home due the housing market crisis and weak economy. Amid these woes, the company's first-quarter scorecard is not expected to spring any surprises for the Wall Street.
Los Angeles, California-based KB Home builds various types of homes, including attached and detached single-family homes, town homes and condominiums, designed primarily for first-time, first move-up adult buyers. It also offers mortgage services in a joint venture with Countrywide KB Home Loans. The company has operations in nine states.
On average, 14 analysts polled by Thomson Reuters expect the company to report a loss of $0.81 per share for the first quarter on revenues of $347.51 million.
KB Home has said earlier it expects the housing market difficulty and general economic uncertainty to continue in 2009. Wall Street analysts estimate a fiscal 2009 loss of $2.08 per share for the company, with revenue estimate of $1.63 billion.
Housing market and general economic conditions in 2009 are expected to remain difficult or possibly worsen as the timing of any meaningful recovery for the homebuilding industry remains uncertain, Jeffrey Mezger, president and chief executive officer of KB Home said in January while announcing the company's fourth-quarter results.
Looking ahead into 2009, we are aiming to build on the momentum we have generated in adapting our business to the ever changing operating environment, Mezger then stated.
In the fourth quarter of fiscal 2008, KB Home's loss narrowed year-over-year, driven by lower costs and income tax expenses, despite a fall in housing revenues. Net loss for the fourth quarter was $307.3 million, or $3.96 per share, compared with a net loss of $772.7 million, or $9.99 per share, last year. Quarterly revenues totaled $919 million, down from $2.07 billion in the prior-year quarter.
As per the company, net orders for homes were lower over the past several quarters, largely the product of weakening demand, rising mortgage foreclosures, tightening mortgage lending standards, and the strategic reductions made by the company in a number of its active selling communities during the same period. Although the company saw an improvement in fourth-quarter cancellation rate, which was 46%, compared with 58% last year, company-wide net orders fell 50% and average selling price decreased 6%.
In January, KB Home's Board has adopted an amendment to its stockholder rights plan and a successor rights plan with a view to preserve the long-term value of its net deferred tax assets. The company has net deferred tax assets of about $880 million that it believes could be used to potentially offset the income tax expense on approximately $2.2 billion of future taxable income for a 20-year period. KB Home intends to seek stockholder approval for the successor rights plan, which will expire on March 5, 2010, if not approved by stockholders before that date.
Among others in the sector, Lennar Corp. (LEN) is scheduled to announce its first-quarter results on March 31. The Street analysts are of the view that the company will post a loss of $0.64 per share for the quarter on revenues of $530.38 million. In the fourth quarter of fiscal 2008, Lennar's net loss narrowed, helped by lower one-time charges. However, revenues were down 40%, hurt by lower home deliveries, prices, increased foreclosures, tighter credit and volatile equity markets.
Another peer, DR Horton Inc. (DHI) has recently reported a narrower loss for the first quarter, driven by lower inventory impairments and land option cost write-offs, despite a decline in revenues. The Fort Worth, Texas-based company's net loss was $62.6 million, or $0.20 per share, compared with a net loss of $128.8 million, or $0.41 per share, last year. DR Horton's homebuilding revenue dipped to $900.3 million from $1.708 billion in the same quarter of fiscal 2008. Financial services revenues also declined from last year to $17.7 million.
In early March, Analyst Oppenheim of Credit Suisse downgraded DR Horton shares to Underperform from Neutral with a price target of $7.50. Oppenheim attributed the downgrade based on increased concerns about the tough selling environment and the company's premium valuation relative to peers.
KBH closed Thursday's trading at $14.16, up $0.78, on a volume of 7.08 million shares. The company's 52-week period trading range was $6.90 - $28.93.
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