KB Homes: Really Getting Better?

KB Homes (KBH) released Q2 results (see earnings call transcript) and announced that, while the housing market is still bad, they have generated cash. Cash is king especially when you are levered as a home builder. They have also taken the opportunity to redeem an expensive debt issue which will improve the balance sheet and reduce interest costs.

Managements comments are all based on rearview-mirror considerations. Yes, cash is up. Given that the markets stink so badly, you need to get a handle on the burn rate for cash. How much longer can the company go before it hits the wall? There is a scenario that can make any company blow up and go under. Management needs to show that it knows where the precipice is, before it goes over it.

Comments

[fxtrader07]

oh yeah? get real! Nobody can forecast how long this housing downturn will last and when the bottom will be reached. And what shape a recovery will take. So you expect from KBH's mgmt to do all this? they will have an informed guess which likely will be wrong. What they have done though, is acting as prudent as they could in this situation. It certainly is a good idea to fill up the tank as much as possible when it is uncertain how long it might take to reach the next stop