On June 18, 2024, KB Home (KBH, Financial) released its 8-K filing for the second quarter ended May 31, 2024. KB Home is an American construction company that focuses on residential construction in the United States, building single-family homes and communities across various geographical segments including the West Coast, Southwest, Central, and Southeast. The company primarily serves first-time and move-up homebuyers and is also engaged in financial services operations through a joint venture providing mortgage banking services.
Performance Overview
KB Home reported revenues of $1.71 billion for the second quarter, slightly below the $1.77 billion from the same period last year but surpassing the analyst estimate of $1.651 billion. The company delivered 3,523 homes, down from 3,666 homes in the previous year. Despite this, the average selling price increased to $483,000 from $479,500.
Net income rose by 2% to $168.4 million, and diluted earnings per share (EPS) increased by 11% to $2.15, significantly exceeding the analyst estimate of $1.78. This growth in EPS reflects higher net income and the favorable impact of the company’s common stock repurchases over the past several quarters.
Key Financial Achievements
KB Home's financial services pretax income rose by 16% to $13.3 million, driven by increased equity in income from the company’s mortgage banking joint venture. The company also reported a $12.5 million gain from the sale of a privately held technology company in which it held an ownership interest, contributing to the total pretax income of $221.1 million, up from $214.9 million.
In terms of liquidity, KB Home had $1.73 billion, including $643.5 million in cash and cash equivalents and $1.08 billion of available capacity under its unsecured revolving credit facility. The company’s investments in land and land development for the six months ended May 31, 2024, increased by 64% to $1.26 billion, compared to $763.2 million for the same period last year.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Revenues | $1.71 billion | $1.77 billion |
| Homes Delivered | 3,523 | 3,666 |
| Average Selling Price | $483,000 | $479,500 |
| Net Income | $168.4 million | $164.4 million |
| Diluted EPS | $2.15 | $1.94 |
Balance Sheet and Cash Flow
As of May 31, 2024, KB Home reported total assets of $6.81 billion, up from $6.65 billion as of November 30, 2023. Inventories totaled $5.34 billion, a 4% increase. The company’s debt to capital ratio improved to 29.8%, down from 30.7%. Stockholders’ equity increased to $3.99 billion, reflecting net income partly offset by common stock repurchases and cash dividends.
Commentary and Analysis
“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.”
KB Home's performance in the second quarter demonstrates its ability to navigate market challenges and capitalize on opportunities. The increase in average selling prices and the strategic investments in land acquisition and development position the company well for future growth. The company's focus on generating substantial cash flows and returning capital to shareholders through share repurchases and dividends further underscores its commitment to delivering value to investors.
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Explore the complete 8-K earnings release (here) from KB Home for further details.
