KB Home rose the most in three months after reporting fiscal second-quarter earnings that beat analysts' estimates and a jump in orders for houses.
Net income for the three months through May was $9.6 million, or 10 cents a share, compared with $26.6 million, or 27 cents, a year earlier, the Los Angeles-based homebuilder said in a statement Friday. The average estimate of 15 analysts was for earnings of 8 cents a share, according to data compiled by Bloomberg. Net orders rose 33% from a year earlier to 3,015.
"Our strong net order performance during the spring selling season underscores the success of our community expansion initiative and the broad appeal of our products and distinctive home-buying experience, as well as healthy demand in our served markets," Jeffrey Mezger, president and chief executive officer of KB Home, said in the statement.
The shares climbed 5.6% to $15.80 at 10 a.m. in New York, the biggest intraday gain since March 20.
KB Home, with a 9.6% decline this year through yesterday, ranks worst among the 11 companies in the S&P Supercomposite Homebuilding Index, which has advanced 4.8%. The company’s shares are undervalued, said Joel Locker, an analyst with FBN Securities Inc.
"This is one of the only two stocks I have at overperform, because it's so cheap compared to the rest of the sector," Locker said in a telephone interview before KB Home's results were announced.
Revenue for the quarter was $623 million, compared with $565 million a year earlier. The company's gross profit margin for houses fell to 16% from 18.9% a year earlier, in part because of higher land and construction costs and pricing pressure in some markets, the company said.
KB Home's contract backlog, which indicates sales in the future, climbed 39% to 4,733. The average selling price of houses was up 6% to $338,500.
