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KB Home (KBH) took its turn reporting earnings Tuesday. While the homebuilder scored its first profit in nearly three years, the stock turned lower in early trading.
In the three months ended November 30, KB Home banked $100.7 million, or $1.31 per share (including a tax gain of $191.7 million). This compares favorably to a year-ago loss of $307.3 million, or $3.96 per share. Revenue, however, dropped to $674.6 million from $919 million on a year-over-year basis. This topped Wall Street's expectations for a per-share loss of 42 cents and revenue of $578 million.
Meanwhile, new home orders jumped 12% to 1,446 compared to the prior year, and the number of buyers canceling contracts on new homes fell to 31% from 46%. Good news, unless compared to the third quarter, when the cancellation rate was 27% and new orders reached 2,158.
So to sum up, profitability is good, a positive revenue surprise is good, but new home orders are a bit sluggish. This is understandable, given the impending expiration of a credit for first-time home buyers. This could be an example of "buy the rumor, sell the news," and when KB Home's earnings showed signs of weakness, the sellers came in.
A half hour into the trading session, KBH was down more than 6%, slipping $1.04 to $15.33. The site of heaviest options activity so far is the front-month 16 put, which has seen nearly 2,000 contracts change hands on open interest of 13,974. One block of 854 contracts traded at 45 cents per contract on this newly in-the-money put, trading between the bid and the ask prices.
Beth works for The Options News Network (www.ONN.tv), which provides daily stock and options commentary. The above comments are not intended as trading advice.
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