KB Home Posts Smaller 3Q Loss as Sales Increase

KB Home set out to compete with foreclosures last year by building smaller, more affordable homes, and the homebuilder's decision is paying off.

FILE - In this June 24, 2009 file photo, a KB Home sign stands at a KB Home development in Sylmar...

FILE - In this June 24, 2009 file photo, a KB Home sign stands at a KB Home development in Sylmar section of Los Angeles. KB Home said Friday, Sept. 25, 2009, its loss narrowed in its fiscal third quarter, as the homebuilder focused on cutting costs, managing inventory levels and building smaller homes to compete with foreclosures.(AP Photo/Jae C. Hong, file)

(AP)

The company said Friday it cut its third-quarter loss as new home orders surged 62 percent from a year earlier and its cheaper-to-build Open Series homes helped bring down costs.

KB also saw fewer buyers back out of their contracts, dropping the builder's cancellation rate for the quarter to 27, down from 51 percent in the previous year.

"Our primary objective remains restoring profitability and our third quarter results show real progress," said Jeff Mezger, KB Home's president and CEO.

The builder's results offered new signs that the housing market, while fragile, is on the mend. New home sales have risen for five months in a row, although the August tally, released by the Commerce Department on Friday, showed only a tepid 0.7 percent increase. Sales are now 30 percent above the bottom in January, but are off about 70 percent from the peak four years ago.

The trend has been a welcome positive for homebuilders like KB, which have been struggling to drum up sales and stem losses through much of the housing downturn. But despite its success in wooing buyers, KB wasn't able to fend off another balance sheet black eye: Its 10th consecutive quarterly loss.

The builder lost $66 million, or 87 cents a share, in the three months ended in August. That compares with a loss of $144.7 million, or $1.87 a share, the same period last year.

Revenue dropped 33 percent to $458.5 million from $681.6 million the year before.

The results missed analysts' expectations. Analysts polled by Thomson Reuters forecasted a loss of 58 cents a share on revenue of about $457.9 million.

Investors sent KB Home's stock down $1.58, or 8.5 percent, to close at $16.96.

The Los Angeles-based homebuilder had 2,240 completed sales in its most recent quarter, a 20 percent decline from the year-ago period, while the average selling price of its homes fell 15 percent to $202,800.