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


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