On Bleak Outlook, KB Lowers Estimates

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KB Home cut its full-year profit forecast Thursday for the second time in three months, attributing the move to a difficult housing market and sharply declining orders.


Los Angeles-based home builder said it now sees full-year profit of $8 to $8.50 per share, down from $11.25 it had projected earlier this year and later adjusted to $10.00 on June 15. The company also forecast profit of $1.85 to $1.95 per share for its third quarter ending August 31. KB said that a 43 percent decline in preliminary net orders and increasing cancellation rates for newer homes forced it to pare its profit estimates.


Chief Executive Bruce Karatz said in a statement that KB Home is being hurt by “weaker-than-expected demand for new homes” and growing inventories in markets that have experienced steep price appreciation and heavy investor activity.


Shares of KB Home fell nearly 2.5 percent to $41.40 in trading on Thursday, joining the shares of other U.S. homebuilders that have slid almost 6 percent in the last two days. Hovnanian Enterprises Inc. reported a 34 percent reduction in earnings as Beazer Homes USA Inc. lowering their earnings forecast as well.


Separately, the National Realtors Association said it expects U.S. home prices to fall for the first time since in more than 13 years in the second quarter that ended June 30. This would mark the first time since February 1993 that the monthly U.S. median price for an existing home fell below the year-ago level.


Also adding to the anxiety of an abrupt slowdown in the market is the rising inventory of unsold existing homes which rose to 3.86 million in July, the highest ever, according to Freddie Mac.

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