Retail stock to watch: KB Home (NYSE: KBH)

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KB Home (NYSE: KBH) stock fell over 2.1% in the after-hours session of January 9th, 2020 (Source: Google finance) after the company beaten the earnings estimate in the fiscal fourth quarter driven by higher sales and strong demand for its built-to-order product at affordable price points. KB Home has reported the net income of $123.2 million, up from $96.8 million, in the same quarter last year. The company has delivered 3,929 homes, which is an increase of 16% in the quarter, while the net orders increased by 38% to 2,777. Net order value had increased by 43% in the fourth quarter to $1.1 billion, which had contributed to a 26% increase in the year-end backlog value to $1.8 billion. In terms of units, the company’s backlog grew to over 5,000 homes, which is the highest fourth-quarter level in a number of years.

Meanwhile, in the quarter, the mortgage interest rates remain low, continuing to underpin favorable market conditions on the back of steady economic expansion, solid job growth, high consumer confidence and positive demographic trends. These factors fueled strong demand, however the supply continued to be insufficient to meet homebuyers’ needs, with resale inventory declining of 3.7 months supply in November, and even lower at the affordable price points where the company operate.

KBH in the fourth quarter of FY 19 has reported the adjusted earnings per share of $1.31, beating the analysts’ estimates for the adjusted earnings per share of $1.29, according to Refinitiv. The company had reported the adjusted revenue growth of 16 percent to $1.56 billion in the fourth quarter of FY 19, missing the analysts’ estimates for revenue of $1.61 billion. In the fourth quarter, the housing revenues rose 15% from a year ago to $1.5 billion driven by a 16% increase in homes delivered, that was partially offset by a slight decline in the overall average selling price.

For the 2020 first quarter, the company expects to generate housing revenues in the range of $910 million to $970 million, which reflects an increase of 18% at the midpoint over the same period of 2019. For the 2020 full year, the company anticipates housing revenues to be in the range of $4.9 billion to $5.3 billion. For the 2020 first quarter, the company expects the homebuilding operating income margin, excluding the impact of any inventory-related charges, to be in the range of 4.9% to 5.3%.

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