Leading Low-Cost Homebuilder Posts 71% Increase in Q4 EPS

Source: Streetwise Reports   01/13/2022

Shares of leading homebuilder KB Home rose 16% after the company reported Q4/21 and FY/21 financial results that included substantial increases in revenues and margins fueled by rising sales prices and demand for new homes nationwide.

After U.S. markets closed for trading yesterday afternoon, national
home-builder KB Home (KBH:NYSE) announced financial results for its fourth quarter and full year of 2021 ended November 30, 2021.

The company’s Chairman, President and CEO Jeffrey Mezger stated “We delivered outstanding growth in revenues and margins in our 2021 fourth quarter, leading to a more than 70% year-over-year increase in earnings per share.

With the strong finish to 2021, we generated a full-year return on equity of approximately 20%…During the past year, we significantly expanded our production capabilities as we scale our business to meet the healthy demand that is driving the housing market and align our starts to net orders.”

“We begin 2022 well-positioned to continue to deliver returns-focused growth. Our nearly $5 billion in backlog value and projected substantial year-over-year increase in community count support significant revenue growth this year. Combined with a meaningful acceleration of our operating margin that we anticipate this year, we expect to produce a return on equity above 26%,” Mezger added.

KB Home reported that in Q4/21 revenues increased by 40% to $1.68 billion, compared to $1.19 billion in Q4/20. During the same period, the company advised that the number of delivered homes rose 28% to 3,679, up from 2,876 in prior year’s corresponding quarter and noted that the average selling price increased 9% to $451,100, versus $413,700 in Q4/20.

The company stated that a favorable pricing environment attributed to strong demand and a limited supply of available homes for sale, contributed to an 85% year-over-year increase in homebuilding operating income to $214.4 million and a y-o-y gross profit margin increases of 230 basis points to 22.3%.

As a result, the firm said that total pretax income in Q4/21 increased by 78% to $223.9 million, compared to $126.1 million in Q4/20.

The company listed that in Q4/21, it posted net income of $174.2 million and diluted earnings per share (EPS) of $1.91, compared to net income of $106.1 million and diluted EPS of $1.12 in Q4/20.

For FY/21, KB Home stated that it posted revenues of $5.72 billion, which was 37% higher than the $4.18 billion achieved in FY/20. Homes delivered in FY21 increased by 26% to 13,472 while average selling price increased by 9% to $422,700.

KB advised that for FY/21 it registered net income of $564.7 million and diluted EPS of $6.01, compared to net income of $296.2 million and diluted EPS of $3.13 in FY/20.

The company noted that both its backlog and net orders remain strong. The firm stated that its backlog rose by 67% y-o-y to $4.95 billion as of November 30, 2021. The highest gains were recorded in the Southeast and West Coast markets.

KB indicated that it continued to make additional investments in new land for future development. The company made new land purchases totaling $2.53 billion in FY/21, which represents a 49% increase over the $1.69 billion it spent during FY/20. The firm added that the number of lots it now owns or that are under contract increased by 29% to 86,768 in FY/21 and noted that it presently owns a total of 48,525 lots which equates to a 3.6-year supply of inventory.

The company provided some forward guidance and stated that for FY/22 it expects total housing revenues of $7.20-7.60 billion. The firm advised that the estimates are based upon average selling prices of between $480,000 and $490,000.

KB Homes listed that housing gross profit margin is expected to be between 25.4% and 26.2%. The company estimates that for FY/22 return on equity will exceed 26%.

KB Home is one of the largest U.S. homebuilders. The Company builds homes for a broad range of buyers from first-time buyers to second move-up and active adult homebuyers. The firm is a builder of single-family homes, condominiums and townhomes. KB indicated that over its 65 years in business it has constructed more than 655,000 residential homes and is currently building home in 47 U.S. markets.

KB Home began the day with a market cap of around $3.7 billion with approximately 87.5 million shares outstanding and a short interest of about 5.1%. KBH shares opened nearly 11% higher today at $46.96 (+$4.58, +10.81%) over yesterday’s $42.38 closing price. The stock has traded today between $46.19 and $49.96 per share and is currently trading at $49.31 (+$6.93, +16.35%).

Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.