Benefitting from the strong demand for residential properties and higher prices, revenues of KB Home (KBH) rose sharply in the second quarter, lifting earnings beyond expectations. The strong results, which came at a time the housing market is facing multiple headwinds such as supply crunch and high interest rates, helped the company’s stock reverse its downtrend.
Second quarter net profit surged to $57.3 million or $0.57 per share from $31.8 million or $0.33 per share a year earlier, helped by a 10% annual growth in revenues to $1.10 billion. The results also benefitted from a marked increase in absorption per community. The company delivered a total of 2,717 homes during the quarter, up 5% compared to last year. The average selling price of a single residential unit rose 4% to $401,800, primarily owing to the acute shortage of available homes.
The average selling price of a single residential unit rose 4% to $401,800, primarily owing to the acute shortage of available homes
“We have made meaningful progress on our Returns-Focused Growth Plan objectives. We expect to continue to generate considerable cash flow from our operations that can be deployed in a balanced manner to enhance stockholder returns,” said KB Home CEO Jeffrey Mezger.
The board of directors of KB Home recently authorized an additional stock repurchase, raising the total authorization to around four million shares.
![KB Home stock rebounds KB Home Q2 earnings beat estimates](https://cdn.news.alphastreet.com/wp-content/uploads/2018/06/KB-Home-earnings-Q2-2018-608x1024.png)
Recent statistics show that overall homebuilding activity jumped to an 11-year high in May, when construction of both single-family and multi-family homes increased. Meanwhile, new homebuilding permits witnessed a second consecutive decline during the month, signaling muted activity in the coming months.
Market watchers predict a not-so-rosy future for the sector, saying the widening supply-demand gap and price escalation would drag buying activity. Underscoring the downbeat outlook, pending home sales dropped for the fifth consecutive month in May, hurt by the supply crunch.
Shares of KB Home gained more than 5% in today’s morning trading session, recovering from the recent losing streak that saw the stock falling 17% since the beginning of the year.
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