KB Home's Q4 Earnings & Revenues Beat Estimates, Stock Up

KB Home's Fiscal Q4 2024 Performance - KB Home reported strong fiscal Q4 2024 results with both revenues and earnings surpassing expectations, showcasing resilience in a fluctuating housing market [1] - Adjusted EPS of $2.52 beat the Zacks Consensus Estimate by 2.9% and increased 36.2% YoY, while total revenues of$ 2 billion topped the consensus by 0.4% and grew 19.5% YoY [4] - Shares surged 10.9% in after-market trading, reflecting investor confidence driven by faster build times and a strong order book [2] Homebuilding Segment Performance - Homebuilding revenues grew 19.7% YoY to $1.993 billion, with 3,978 homes delivered, up 17% YoY, exceeding the projected 3,850 units [5] - Average selling price (ASP) increased 3% YoY to$ 501,000, slightly below the projected $511,600, while build times were reduced by 28% YoY [5] - Net orders surged 41% YoY to 2,688 units, with order value also up 41% to$ 1.32 billion, though below the projected 3,008 units or $1.51 billion [6] - The cancellation rate improved to 17% of gross orders, down from 28% YoY, and absorption rate increased to 3.5 monthly net orders per community from 2.7 [6] Financial Metrics and Margins - Housing gross margin (excluding inventory-related charges) improved 10 bps YoY to 20.9%, despite challenges like elevated mortgage rates and material costs [8] - SG&A expenses as a percentage of housing revenues decreased 50 bps to 9.4%, reflecting improved operating leverage [9] - Homebuilding operating margin (excluding inventory-related charges) rose 60 bps to 11.5%, exceeding the projected 11.3% [9] Financial Services Segment - Financial services revenues declined 23.8% YoY to$ 6.85 million, while pretax income increased 7.7% YoY to $13.1 million, driven by higher equity income from the mortgage banking joint venture [10] Fiscal 2024 Highlights - Full-year revenues grew 8.1% YoY to$ 6.93 billion, with EPS rising over 20% to $8.45 [11] - Homes delivered increased 7% to 14,169, with ASPs up to$ 486,900 from $481,300 YoY, while adjusted gross margins were 21.1%, down 30 bps [11] Financial Position and Share Repurchases - Cash and cash equivalents stood at$ 598 million as of Nov. 30, 2024, down from $727.1 million at fiscal 2023-end, with total liquidity of$ 1.68 billion [12] - Debt-to-capital ratio improved to 29.4% from 30.7% at fiscal 2023-end [12] - The company repurchased 4,725,181 shares for $350 million in fiscal 2024, with$ 700 million remaining under the repurchase authorization [13] Fiscal 2025 Guidance - Housing revenues are projected to be between $7-$ 7.50 billion, with ASPs estimated at $488,000-$ 498,000 [14] - Housing gross margin is expected to be 20%-21%, with operating margin projected at 10.7% and SG&A expenses at 9.6%-10% of housing revenues [14][15] - The effective tax rate is estimated at 24%, with the ending community count expected to be within 250 [15] Industry Comparisons - Lennar Corporation reported weak Q4 2024 results, with earnings and revenues missing estimates and declining YoY due to high mortgage rates and low ASPs [17] - Acuity Brands reported mixed Q1 2025 results, with earnings beating estimates for the 19th consecutive quarter but net sales missing expectations [18] - RPM International reported strong Q2 2025 results, with earnings and sales beating estimates and increasing YoY, driven by record adjusted EBIT and reduced interest expenses [19][20]