Ticonderoga Maintains a 'Buy' on KB Home (KBH); First Look – Ops Very Disappointing. Inspirada Overhang Reduced
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Price: $56.06 -0.48%
Rating Summary:
4 Buy, 24 Hold, 7 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
4 Buy, 24 Hold, 7 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Ticonderoga maintains a 'Buy' on KB Home (NYSE: KBH), PT $16.
Ticonderoga analyst says, "KBH’s operational results were shockingly disappointing. All the headway made during 2010 appears to have been tossed and the bar reset back one year. The only positive we take away—and it is an important positive - is that the Inspirada JV apparently has taken its charges, thus removing some useful overhang on the equity. Now to get the building operations moving forward again."
"The second massive disappointment after orders is the Operating Margin, which was a negative 17.8%. There is no way around it—this result is pathetic. Unfortunately, both the gross margin and SG&A lines are to blame. The Gross Margin was a weak 13.8%, sharply below last year, last quarter and our estimate. We are disappointed that this level of mediocrity was not telegraphed better during last quarter’s conference call given that this is a metric embedded in the backlog. There may be two reasons for this level of gross margin. First, the Orders discounting may have caused discounting in the backlog to avoid cancellations. Second, KBH sold a large multi-family complex as a bulk sale, likely depressing gross margins. SG&A was 25.7% of sales. Again, we are disappointed and perplexed given the SG&A dollars only fell $10M sequentially while revenues fell more than $300M."
"In sum, there are no excuses to be had here. The operations were bad top to bottom. If Inspirada charges are behind KBH, that is the only saving grace this quarter."
For more ratings news on KB Home click here and for the rating history of KB Home click here.
Shares of KB Home closed at $12.20 yesterday.
Ticonderoga analyst says, "KBH’s operational results were shockingly disappointing. All the headway made during 2010 appears to have been tossed and the bar reset back one year. The only positive we take away—and it is an important positive - is that the Inspirada JV apparently has taken its charges, thus removing some useful overhang on the equity. Now to get the building operations moving forward again."
"The second massive disappointment after orders is the Operating Margin, which was a negative 17.8%. There is no way around it—this result is pathetic. Unfortunately, both the gross margin and SG&A lines are to blame. The Gross Margin was a weak 13.8%, sharply below last year, last quarter and our estimate. We are disappointed that this level of mediocrity was not telegraphed better during last quarter’s conference call given that this is a metric embedded in the backlog. There may be two reasons for this level of gross margin. First, the Orders discounting may have caused discounting in the backlog to avoid cancellations. Second, KBH sold a large multi-family complex as a bulk sale, likely depressing gross margins. SG&A was 25.7% of sales. Again, we are disappointed and perplexed given the SG&A dollars only fell $10M sequentially while revenues fell more than $300M."
"In sum, there are no excuses to be had here. The operations were bad top to bottom. If Inspirada charges are behind KBH, that is the only saving grace this quarter."
For more ratings news on KB Home click here and for the rating history of KB Home click here.
Shares of KB Home closed at $12.20 yesterday.
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