UPDATE: KB Home Narrows Loss But Revenue Cut In Half; Stock Falls
January 09 2009 - 11:29AM
Dow Jones News
By John Spence
BOSTON (Dow Jones) -- KB Home said Friday its fourth-quarter
loss was narrower than a year ago, but revenue and orders for new
houses were roughly cut in half and the stock followed home-builder
shares lower in early trading.
The company (KBH) before the opening bell reported a quarterly
net loss of $307.3 million, or $3.96 a share, compared with a loss
of $772.7 million, or $9.99 a share, in the year-earlier
period.
It said total revenue dropped to $919 million from $2.07 billion
as residential builders continue to feel the bite of the housing
slump.
"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 home-building industry remains
uncertain," Chief Executive Jeffrey Mezger said in the earnings
release.
KB Home's latest quarterly results included pretax charges of
$265.9 million for inventory and joint venture impairments and
land-option contract abandonments. The results also included $43.4
million to write off all remaining goodwill, and an after-tax
charge of $98.9 million to record a valuation allowance against the
net deferred tax assets.
In the fourth quarter of 2007, KB Home booked impairment charges
of $403.4 million.
Fourth-quarter net orders fell 50% from the year-earlier period
to 1,296 homes, the company said.
"We believe KB Home is in an extremely tough position in the
near term from an order generation perspective as its
build-to-order model gets slapped around in the current bloated
inventory environment," said Pali Research analyst Stephen East in
an earnings preview this week.
KB Home shares were down more than 10% in early trade Friday as
the home-builder sector experienced heavy selling. Lennar Corp.
(LEN) was off more than 20%.
Home builders are struggling against one of the worst U.S.
housing corrections in history. Through October, national home
prices were down more than 20% from their peak, according to the
Case-Shiller price index published by Standard & Poor's.
In another sign that further weakening may be in store for the
U.S. housing market, the National Association of Realtors earlier
this week reported pending home sales fell 4% in November from the
previous month.
CEO Mezger said "unprecedented downward pressures" are
continuing to weigh on the home-building industry and the overall
economy.
Economic turmoil, including massive job losses, continues to
affect the housing market. The U.S. economy lost 524,000 jobs in
December, closing out the worst year for job losses since World War
II, the Labor Department said Friday in a highly anticipated
report.
Although mortgage rates and home prices have come down and made
houses more affordable, some analysts are warning that 2009 may end
up being a bad time to buy a home as job losses mount.
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.