KB Home: Losses shrink, new home orders rise

KB Home kbh slashed its quarterly loss by 78%, more than expected, and reported a 26% increase in new homes orders as cost-conscious buyers flocked to the builder's smaller and more affordable models.

The Los-Angeles based company's results, also helped by cost cuts and smaller accounting charges, were a ray of hope for a housing market troubled by weak sales and dropping prices in a troubled economy.

"Our progress on improving our performance was evident in the first quarter," Jeffrey Mezger, chief executive, said in a statement. But he warned the housing market continues to be challenged by oversupply of homes, declining prices, tight lending standards, rising unemployment and weak consumer confidence.

For the quarter, which ended Feb. 28, KB Home reported a net loss of $58.1 million, or 75 cents a share, compared with a net loss of $268.2 million, or $3.47 a share, in the same period the year before.

Total revenues were $307.4 million, down 61%, because home sales were half last year's levels and the average price dropped 15% to $210,700.

Included in the net loss were charges for inventory and joint venture impairments, and abandoned land option contracts, totaling $32.3 million. That's a decrease of 86% from the $223.9 million of similar charges in the first quarter of 2008.

Analysts polled by Thomson Reuters predicted a loss of 81 cents per share on revenue of $348 million.

Reacting to the news, investors bid up KB Home's shares by 42 cents to $14.58 when the stock market opened Friday.

The company has stepped up its roll out of smaller, more affordable homes aimed at competing with foreclosures and other previously occupied homes. New home orders totaled 1,827, and the cancellation rate plunged to 28% from 53% in the year-ago quarter.

Coupled with recent housing data that showed sales of new homes and previously occupied homes improved between January and February, the new orders can be seen as a cause for some optimism.