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Shares of KB Home (NYSE: KBH ) fell more than 2% on Thursday. The stock has fallen 29% over the past 12 months. The company reported earnings results for the fourth quarter of 2022 a day ago, where revenue and earnings missed. However, KB still remains optimistic about the long-term prospects of the housing market.
Quarterly performance
In the fourth quarter of 2022, revenue rose 16% year-on-year to $1.94 billion but fell short of market estimates. Net income increased 24% to $216.4 million while EPS increased 29% to $2.47 compared to the previous year. However, EPS missed expectations.
Trends
KB Home continues to face a challenging environment as high mortgage rates, inflation, and economic uncertainty have made homebuyers more wary since the middle of last year. Due to the decline in demand caused by these factors, the company saw net orders in Q4 2022 fall to 692 from 3,529 in the same period last year. Net order value fell to $362.7 million from $1.77 billion last year.
During the fourth quarter, KB Home focused mainly on delivering its large backlog and protecting its margins rather than finding new sales. In Q4, homes delivered increased 3% to 3,786 while the average sale price increased 13% to $510,400. KB will continue to focus on this shipment because it has a backlog of more than 7,600 homes, which represents about $3.69 billion in future revenue.
Based on market dynamics and backlog levels in each community, the company plans to be more aggressive with pricing ahead of the Spring selling season to secure new orders. It is also looking for ways to reduce direct construction costs and build time in order to offset the impact of price adjustments.
KB Home plans to moderate land investment until market conditions improve, but believes it is well positioned to navigate the current environment. The company remains confident in the long-term prospects of the housing market due to favorable demographics and a prolonged lack of housing supply.
Outlook
For the first quarter of 2023, KB Home expects home revenues to be between $1.25-1.40 billion and average sales prices to be between $490,000-500,000. The average number of communities is expected to rise by 15-20%. For the full year of 2023, domestic revenue is expected to be between $5-6 billion.
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