U.S. homebuilder KB Home reported a Q4 net loss last night on substantial land impairment charges and contract cancellations and warns that the next two quarters are likely to be challenging. The company took a pretax charge of $343.3 million for abandoning land option contracts and writing down inventory, practices increasingly common among homebuilders in the current environment of excess inventory and price pressures. KB Home posted a net loss of $49.6 million ($0.64/share) for fiscal Q4 versus net income of $304.4 million ($3.44/share) a year earlier; last year's results were restated following an investigation into the company's option practices that led to the ouster of long-time CEO Bruce Karatz. Revenue rose 13% to $3.55 billion but net orders fell 38%. The company saw a 48% cancellation rate in the quarter, up from 31% percent a year ago but down from 53% percent in Q3.
Sources: New York Times, Wall Street Journal, TheStreet.com. Conference call transcript: Q4 2006
Commentary: Latest Options Backdating Probe: KB Home • Weak Housing Forecasts Foretell Further Downside • Homebuilder Stocks: Is the Worst Over?
Stocks/ETFs to watch: KB Home (KBH). Competitors: DR Horton Inc. (DHI), Lennar Corp. (LEN), Pulte Homes Inc. (PHM). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB)
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