KB Home Reports 2024 Second Quarter Results
KB Home (NYSE: KBH) reported its 2024 second-quarter results, showing revenues of $1.71 billion and a 11% increase in diluted earnings per share (EPS) to $2.15. Net orders rose 2% to 3,997, while net order value expanded 7% to $2.03 billion. The average selling price increased to $483,000, but homes delivered decreased to 3,523. Homebuilding operating income was $188.2 million with a margin of 11.1%. Financial services pretax income rose 16% to $13.3 million. The company's total liquidity was $1.73 billion, with investments in land development up 64% to $1.26 billion. Stockholders' equity grew to $3.99 billion, and the quarterly dividend increased to $.25 per share. KB Home authorized the repurchase of up to $1 billion of common stock.
- Revenues of $1.71 billion.
- Diluted EPS increased 11% to $2.15.
- Net orders rose 2% to 3,997.
- Net order value increased 7% to $2.03 billion.
- Average selling price increased to $483,000.
- Financial services pretax income rose 16% to $13.3 million.
- Total liquidity of $1.73 billion.
- Investments in land development rose 64% to $1.26 billion.
- Stockholders' equity grew to $3.99 billion.
- Quarterly dividend increased to $.25 per share.
- Authorized repurchase of up to $1 billion of common stock.
- Revenues decreased from $1.77 billion.
- Homes delivered decreased to 3,523.
- Homebuilding operating income down to $188.2 million from $202.1 million.
- Operating income margin decreased to 11.1%.
- SG&A expenses increased to 10.1% of housing revenues.
- Backlog homes of 6,270 and backlog value of $3.12 billion were down 14% and 10%, respectively.
KB Home's Q2 2024 results show some mixed signals but generally positive trends that retail investors should scrutinize carefully. While revenues slightly decreased by approximately
Investors should also note the net order value increased by
Cash flows appear solid and the company is balancing its capital allocation effectively with investments in land acquisition and development growing by
However, it's important for investors to consider potential risks such as the slight decrease in homebuilding operating income and an increase in SG&A expenses as a percentage of housing revenues. These could indicate rising operational costs that need to be managed carefully in the future.
The housing gross profit margin remaining stable at
Furthermore, the increase in monthly net orders per community to 5.5 from 5.2 is encouraging. It reflects positively on the company's 'Built to Order' model, which appears to be resonating well with buyers. This increase in net orders per community is indicative of effective sales strategies and strong demand within existing markets.
The company's dividend increase and new stock repurchase authorization are also positive signs, showing a commitment to returning value to shareholders. However, retail investors should keep an eye on the company's ability to maintain these through continued strong performance in the face of economic fluctuations.
Lastly, the planned community openings and increase in lot count to 65,533 further signals KB Home's confidence in its growth prospects. These developments will be critical in sustaining long-term revenue and profit growth.
Revenues Totaled
Net Orders Up
“We produced solid results in our 2024 second quarter, with our key metrics above the high end of our guidance ranges,” said Jeffrey Mezger, Chairman and Chief Executive Officer. “Buyers remained resilient in their desire for homeownership despite the volatility in mortgage interest rates. Our pace of monthly net orders per community was one of our highest second quarter levels in many years, which we believe reflected the compelling personalized choice that our Built to Order model offers to meet each buyer’s lifestyle and budget.”
“Our business is generating substantial cash flows, and we are continuing our balanced approach in allocating this capital, focused on both expanding our scale and returning cash to our stockholders. In the 2024 second quarter, we significantly increased our investment in land acquisition and development, repurchased additional shares and raised our quarterly dividend. With a healthy expansion in our owned and controlled lot count, as well as our planned community openings, we are confident we are well positioned for future growth,” concluded Mezger.
Three Months Ended May 31, 2024 (comparisons on a year-over-year basis)
-
Revenues totaled
$1.71 billion $1.77 billion - Homes delivered were 3,523, compared to 3,666.
-
Average selling price increased to
$483,000 $479,500 -
Homebuilding operating income totaled
$188.2 million $202.1 million 11.1% , compared to11.5% . Excluding total inventory-related charges of$1.2 million $4.3 million 11.1% , compared to11.7% .-
The housing gross profit margin of
21.1% was even with the year-earlier quarter. Excluding the above-mentioned inventory-related charges, the housing gross profit margin was21.2% , compared to21.4% . -
Selling, general and administrative expenses as a percentage of housing revenues were
10.1% , compared to9.6% , mainly reflecting higher costs including marketing and other expenses associated with the Company’s planned increase in its community count during the year to position its operations for growth.
-
The housing gross profit margin of
-
Financial services pretax income rose
16% to$13.3 million 86% of the buyers financing their home purchases in the current quarter used the joint venture, up from80% . -
Total pretax income, which included a
$12.5 million $221.1 million $214.9 million -
Net income rose
2% to$168.4 million 11% to$2.15 -
The effective tax rate was
23.8% , compared to23.5% .
-
The effective tax rate was
Six Months Ended May 31, 2024 (comparisons on a year-over-year basis)
-
Revenues totaled
$3.18 billion $3.15 billion -
Homes delivered of 6,560 were up
2% . -
Average selling price was
$481,700 $486,000 -
Net income increased
6% to$307.1 million -
Diluted earnings per share were up
16% to$3.91
Backlog and Net Orders (comparisons on a year-over-year basis, except as noted)
-
Net orders for the quarter increased
2% to 3,997. Net order value rose7% to$2.03 billion - Monthly net orders per community increased to 5.5 from 5.2.
-
The cancellation rate as a percentage of gross orders improved to
13% , compared to22% .
-
The Company’s ending backlog homes of 6,270 and ending backlog value of
$3.12 billion 14% and10% , respectively. The year-over-year decreases narrowed for the fourth consecutive quarter. -
The Company’s average community count for the quarter was down
4% to 243, and ending community count was essentially flat at 247. On a sequential basis, the ending community count expanded4% .
Balance Sheet as of May 31, 2024 (comparisons to November 30, 2023, except as noted)
-
The Company had total liquidity of
$1.73 billion $643.5 million $1.08 billion -
Inventories totaled
$5.34 billion 4% .-
The Company’s investments in land and land development for the six months ended May 31, 2024 increased
64% to$1.26 billion $763.2 million -
The Company’s lots owned or under contract grew
17% to 65,533, of which approximately61% were owned and39% were under contract. By comparison, approximately73% of the Company’s total lots were owned and27% were under contract as of November 30, 2023.
-
The Company’s investments in land and land development for the six months ended May 31, 2024 increased
-
Notes payable of
$1.70 billion 29.8% , compared to30.7% . -
Stockholders’ equity increased to
$3.99 billion $3.81 billion -
In April 2024, the Company’s board of directors approved an increase in the quarterly cash dividend on the Company’s common stock to
$.25 per share from$.20 per share, and authorized the repurchase of up to$1.00 billion -
In the 2024 second quarter, the Company repurchased 764,742 shares of its outstanding common stock at a total cost of
$50.0 million $100.0 million $62.84 $950.0 million -
Based on the Company’s 75.2 million outstanding shares as of May 31, 2024, book value per share of
$53.08 14% year over year.
-
In April 2024, the Company’s board of directors approved an increase in the quarterly cash dividend on the Company’s common stock to
Guidance
The Company is providing the following guidance for its 2024 full year:
-
Housing revenues in the range of
$6.70 billion $6.90 billion -
Average selling price in the range of
$485,000 $495,000 -
Homebuilding operating income as a percentage of revenues in the range of
11.0% to11.4% , assuming no inventory-related charges.-
Housing gross profit margin in the range of
21.1% to21.5% , assuming no inventory-related charges. -
Selling, general and administrative expenses as a percentage of housing revenues of approximately
10.1% .
-
Housing gross profit margin in the range of
-
Effective tax rate of approximately
23.0% . - Ending community count in the range of 250 to 255.
The Company plans to also provide guidance for its 2024 third quarter on its conference call today.
Conference Call
The conference call to discuss the Company’s 2024 second quarter earnings will be broadcast live TODAY at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. To listen, please go to the Investor Relations section of the Company’s website at kbhome.com.
About KB Home
KB Home is one of the largest and most trusted homebuilders in
Forward-Looking and Cautionary Statements
Certain matters discussed in this press release, including any statements that are predictive in nature or concern future market and economic conditions, business and prospects, our future financial and operational performance, or our future actions and their expected results are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and projections about future events and are not guarantees of future performance. We do not have a specific policy or intent of updating or revising forward-looking statements. If we update or revise any such statement(s), no assumption should be made that we will further update or revise that statement(s) or update or revise any other such statement(s). Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to the following: general economic, employment and business conditions; population growth, household formations and demographic trends; conditions in the capital, credit and financial markets; our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; the execution of any securities repurchases pursuant to our board of directors’ authorization; material and trade costs and availability, including building materials and appliances, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; consumer and producer price inflation; changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve has increased sharply over the past two years and may further increase to moderate inflation, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; our compliance with the terms of our revolving credit facility and our senior unsecured term loan; the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under our revolving credit facility or unsecured letter of credit facility; volatility in the market price of our common stock; home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; competition from other sellers of new and resale homes; weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas; any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as the Internal Revenue Service’s recent guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes; changes in
KB HOME CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
For the Three Months and Six Months Ended May 31, 2024 and 2023 (In Thousands, Except Per Share Amounts – Unaudited) |
|||||||||||||||
|
Three Months Ended May 31, |
|
Six Months Ended May 31, |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Total revenues |
$ |
1,709,813 |
|
|
$ |
1,765,316 |
|
|
$ |
3,177,579 |
|
|
$ |
3,149,630 |
|
Homebuilding: |
|
|
|
|
|
|
|
||||||||
Revenues |
$ |
1,701,512 |
|
|
$ |
1,757,846 |
|
|
$ |
3,163,210 |
|
|
$ |
3,136,383 |
|
Costs and expenses |
|
(1,513,329 |
) |
|
|
(1,555,744 |
) |
|
|
(2,817,351 |
) |
|
|
(2,777,792 |
) |
Operating income |
|
188,183 |
|
|
|
202,102 |
|
|
|
345,859 |
|
|
|
358,591 |
|
Interest income and other |
|
19,449 |
|
|
|
1,729 |
|
|
|
25,306 |
|
|
|
2,196 |
|
Equity in income (loss) of unconsolidated joint ventures |
|
224 |
|
|
|
(313 |
) |
|
|
(221 |
) |
|
|
(1,070 |
) |
Homebuilding pretax income |
|
207,856 |
|
|
|
203,518 |
|
|
|
370,944 |
|
|
|
359,717 |
|
Financial services: |
|
|
|
|
|
|
|
||||||||
Revenues |
|
8,301 |
|
|
|
7,470 |
|
|
|
14,369 |
|
|
|
13,247 |
|
Expenses |
|
(1,473 |
) |
|
|
(1,472 |
) |
|
|
(3,019 |
) |
|
|
(2,830 |
) |
Equity in income of unconsolidated joint venture |
|
6,435 |
|
|
|
5,426 |
|
|
|
13,490 |
|
|
|
7,008 |
|
Financial services pretax income |
|
13,263 |
|
|
|
11,424 |
|
|
|
24,840 |
|
|
|
17,425 |
|
Total pretax income |
|
221,119 |
|
|
|
214,942 |
|
|
|
395,784 |
|
|
|
377,142 |
|
Income tax expense |
|
(52,700 |
) |
|
|
(50,500 |
) |
|
|
(88,700 |
) |
|
|
(87,200 |
) |
Net income |
$ |
168,419 |
|
|
$ |
164,442 |
|
|
$ |
307,084 |
|
|
$ |
289,942 |
|
Earnings per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
2.21 |
|
|
$ |
2.00 |
|
|
$ |
4.02 |
|
|
$ |
3.49 |
|
Diluted |
$ |
2.15 |
|
|
$ |
1.94 |
|
|
$ |
3.91 |
|
|
$ |
3.38 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
75,653 |
|
|
|
81,764 |
|
|
|
75,773 |
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