Also, changes in existing federal and state tax laws and corporate income tax rates could affect future tax results and the realization of deferred tax assets over time.

At the same time, results were negatively affected by construction services and building material cost pressures, as well as supply chain disruptions and other production-related challenges, as described above under “Overview.”West Coast.

Through the first six weeks of our 2023 first quarter, our net orders were down 68% relative to the comparable year-earlier period.

However, our 2022 performance was offset by the difficult conditions during the 2022 second half, as well as supply chain challenges and higher construction costs, as described below.

In the 2022 second half, we saw a weakening in housing demand as inflationary pressures and mortgage interest rates increased, which contributed to the significant year-over-year decline in our net orders and ending backlog for the year as described above under “Overview.”

In the 2022 second half, U.S. housing demand weakened significantly compared to the year-earlier period, with the combination of sharply higher mortgage interest rates since early 2022, elevated inflation, several years of rising housing prices, financial market turbulence, and various other macroeconomic and geopolitical concerns negatively affecting consumer budgets, including their ability to qualify for mortgage loans, and confidence, both generally and specifically as to purchasing a home.

However, the combination of sharply higher mortgage interest rates since early 2022, several years of rising housing prices, elevated inflation and various other macroeconomic and geopolitical concerns, weakened housing demand in the 2022 second half.

In 2021 and 2022, we, like other homebuilders, continued to experience production challenges due to these supply chain disruptions, as well as ongoing restricted construction services availability and delays with respect to state and municipal construction permitting, inspection and utility processes, which have been disrupted by key equipment shortages.

Based on the actions we are taking and planning to take during the quarter to stimulate gross orders, we anticipate net orders in the 2023 first quarter to be down between 50% and 60% year over year against a strong comparison in the prior-year period.

Since 2020, we have experienced intensifying building material cost pressures, particularly for lumber, and production capacity issues with some of our main product suppliers, reflecting sustained high levels of homebuilding and renovation activity combined with supply chain disruptions stemming from international and domestic COVID-19 control responses.

Reflecting the considerable second-half housing market slowdown and our prioritizing delivering our backlog and protecting our margins over pursuing incremental gross orders, our net orders and net order value declined significantly on a year-over-year basis in the 2022 third quarter.

The number of homes in our backlog at November 30, 2022 decreased 27% from the previous year, mainly due to the year-over-year decline in our 2022 net orders.

Net orders from our homebuilding operations decreased 33% from 2021 with the pace of monthly net orders per community slowing 35% to 4.1.

In the 2022 fourth quarter, our year-over-year net orders and net order value declined 80% and 79%, respectively, reflecting a significant reduction in our monthly net orders per community, partly offset by an 11% increase in our average community count due to new community openings and fewer communities selling out.

Both net orders and net order value were down on a year-over-year basis in each of our four homebuilding reporting segments.

The year-over-year decreases became more pronounced in the 2022 fourth quarter, with net orders and net order value down 80% and 79%, respectively, from the year-earlier quarter and decreasing in each of our four homebuilding reporting segments.

In 2022, the equity in income of our unconsolidated joint venture, KBHS, decreased 12% year over year as a result of a decrease in KBHS’ income.

The potential future housing revenues in our backlog at November 30, 2022 decreased 25% year over year as a result of fewer homes in our backlog, partly offset by a 3% increase in the average selling price of those homes.

With the substantial decline in net orders in the 2022 second half, our ending backlog value at November 30, 2022 decreased 25% from the previous year to approximately $3.69 billion.

In addition, we believe the supply chain disruptions and construction cost pressures described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations will generally persist in 2023.

Deterioration in the supply and demand factors in the overall housing market or in an individual market or submarket, or changes to our operational or selling strategy at certain communities may lead to additional inventory impairment charges, future charges associated with land sales or the abandonment of land option contracts or other similar contracts related to certain assets.

Inflation is often accompanied by higher interest rates, which have a negative impact on housing affordability.

We anticipate these affordability pressures and consumer uncertainty will continue to impact housing demand into 2023, with lower net orders and higher cancellation rates anticipated for the first half of the year as compared to the corresponding prior-year period.

We believe these challenging circumstances affecting our land development and home construction activities will generally persist and possibly worsen in 2023.

KBHS’ income decreased from the previous year due to lower margins on loan originations, reflecting increased competition in the primary mortgage market amid rising interest rates, partly offset by a $20.3 million gain resulting from a substantial increase in the fair value of interest rate lock commitments (“IRLCs”) within the joint venture.

Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit 45 margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.

While we attempt to pass on increases in our costs through increased home selling prices, market forces, such as the housing market slowdown as we experienced in the 2022 second half, can limit our ability to do so.

The Federal Reserve’s aggressive raising of the federal funds interest rate and other measures during 2022 to moderate persistent U.S. inflation, and the further actions it may take, are expected to be an ongoing headwind for the housing market in 2023, as they have elevated mortgage loan interest rates and created macroeconomic uncertainty and financial market turbulence that, among other things, has tempered consumer demand for homes.

If we are unable to raise selling prices enough to compensate for higher costs, or if mortgage loan interest rates continue to increase significantly, our revenues, housing gross profit margin and net income could be adversely affected.

While we have implemented measures to help mitigate these disruptions, as discussed above under Item 1 – Business in this report, they extended our construction cycle times and delayed deliveries throughout 2021 and 2022.

The number of lots we owned or controlled under land option contracts and other similar contracts at November 30, 2022 decreased 21% from November 30, 2021, primarily reflecting the above-mentioned pivot in our land investment strategy, which included our abandoning 15,678 previously controlled lots in the 2022 second half.

Corporate and other had operating losses of $145.3 million in 2022, $148.9 million in 2021 and $107.2 million in 2020.

The number of homes in backlog and backlog value decreased in each of our four homebuilding reporting segments, with decreases in value ranging from 48% in our West Coast segment to 4% in our Southeast segment.

If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs.

The value of our 2022 net orders declined 27% from 2021 as the decrease in net orders was partly offset by a 9% increase in the overall average selling price of those orders.

As the housing market continued to slow in the 2022 fourth quarter, we decided to further reduce our land investment activity to align with our growth expectations for that period and 2023.

As the selling price of each of our homes is fixed at the time a buyer enters into a home purchase contract, and because we generally commence construction of a home only after we have a signed purchase contract with a homebuyer, any interim construction-related cost inflation can result in lower housing gross profit margins.

Reflecting these shifts in our land strategy, our land acquisition investments for the 2022 fourth quarter decreased 74% to $68.0 million, compared to $258.5 million, with our total land and land development expenditures for the quarter decreasing 29% year over year to $442.7 million, compared to $621.7 million.

While the actual results for a particular construction project are accurately reported over time, variances between the budgeted and actual costs of a project could result in the understatement or overstatement of construction and land costs and homebuilding gross profits in a particular reporting period.

Despite these substantial headwinds, in 2022, we generated year-over-year improvements in our financial results through our ongoing focus on balancing pace, price and construction starts at each community to enhance our returns and build a substantial backlog, and the favorable pricing and housing supply/demand environment prevailing in the 2022 first half and prior periods, when most buyers contracted to purchase the homes delivered this year.

Homebuilding revenues for 2022 grew 21% from the previous year due to an increase in housing revenues that reflected a 2% increase in the number of homes delivered to 13,738 and an 18% increase in the overall average selling price of those homes to $500,800.

The increase in our homebuilding operating income margin was driven by significant improvements in both housing gross profit margin and selling, general and administrative expenses as a percentage of housing revenues.

Our pretax income margin improved 340 basis points to 15.5%.

Though we expect affordability pressures and consumer uncertainty to have a significant negative impact on our net orders in 2023 compared to corresponding prior-year periods, we believe the long-term housing market outlook remains positive and we are well positioned to meet current market conditions with our affordable product offerings, lot supply, strong balance sheet and liquidity.

Housing revenues in 2022 grew 21% from the previous year, due to a 2% increase in the number of homes delivered and an 18% increase in their overall average selling price that primarily reflected the favorable housing market environment in the 2022 first half and earlier periods when most buyers contracted to purchase those homes, as well as product and geographic mix shifts of homes delivered.

Although the homes delivered in 2022 were impacted by the ongoing supply chain disruptions and other production-related issues that extended our cycle times, as described above under “Overview,” housing revenues increased in all four of our homebuilding reporting segments, reflecting double-digit increases in average selling prices in each segment.

Our homebuilding operating income grew 57% in 2022, as compared to the previous year, reflecting higher housing gross profits, partly offset by an increase in selling, general and administrative expenses.

Excluding inventory-related charges for both periods, our homebuilding operating income margin improved 380 basis points to 15.6% in 2022 from 11.8% in 2021.

The year-over-year improvement reflected increases in both our housing revenues and housing gross profit margin.

Housing gross profit margin increased 270 basis points from the previous year, mainly as a result of the favorable housing market environment in the 2022 first half and earlier periods when most buyers purchased the homes delivered, which more than offset higher construction costs (approximately 280 basis points); and lower amortization of previously capitalized interest as a percentage of housing revenues (approximately 60 basis points).

Our net order results for 2022 reflect the generally favorable 2022 first half housing market conditions and the significant weakening in the 2022 second half, as described above under “Overview.”

The financial results of our homebuilding reporting segments for 2022 improved largely due to year-over-year increases in the average selling prices of homes delivered that reflected the favorable pricing and supply/demand environment in the 2022 first half and prior periods when most buyers contracted to purchase the homes delivered, as well as the product and geographic mix shifts of homes delivered.

As a percentage of revenues, this segment’s 2022 operating income increased from the previous year, reflecting a 330 basis-point expansion in the housing gross profit margin to 23.2%, and a 30 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.1%.

The housing gross profit margin expansion was primarily driven by the favorable housing market environment in the 2022 first half and earlier periods when most buyers contracted to purchase the homes delivered, and lower relative amortization of previously capitalized interest.

Housing revenues for 2022 grew 16% year over year from $955.7 million, mainly due to an increase in the average selling price of homes delivered.

As a percentage of revenues, operating income improved from 2021, primarily due to a 220 basis-point increase in the housing gross profit margin to 28.9%, and a 50 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.4%.

The housing gross profit margin expansion mainly reflected the favorable housing market environment in the 2022 first half and earlier periods when most buyers contracted to purchase the homes delivered, and lower relative amortization of previously capitalized interest, partly offset by higher construction costs.

In 2022, the improvement in operating income as a percentage of revenues reflected a 160 basis-point expansion in the housing gross profit margin to 23.6% and a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 8.0%.

The housing gross profit margin expanded from the previous year primarily due to the favorable housing market environment in the 2022 first half and earlier periods when most buyers contracted to purchase the homes delivered, and lower relative amortization of previously capitalized interest, partly offset by higher construction costs and an increase in inventory-related charges.

We believe several long-term housing market fundamental factors remain positive, including favorable demographics, a decade-plus underproduction of new homes in relation to population growth and low resale home inventory.

We believe we are in a strong position to navigate the current environment, with a solid balance sheet and anticipated healthy cash flow in 2023.

In addition, we believe our differentiating, highly customer-centric Built to Order business model and operational capabilities will help us to effectively meet evolving consumer preferences and budgets.

Homebuilding operating income for 2022 rose 57% year over year to $1.04 billion and, as a percentage of homebuilding revenues, expanded 350 basis points to 15.1%.

Homebuilding revenues of $6.88 billion for 2022 grew 21% from the prior year due to an increase in housing revenues, partly offset by a decrease in land sale revenues.

As a percentage of homebuilding revenues, our homebuilding operating income for 2022 improved 350 basis points year over year to 15.1%.

Operating income improved significantly from 2021, reflecting higher housing gross profits, partially offset by higher selling, general and administrative expenses and a $2.6 million land sale loss, which was comprised solely of an impairment charge related to a parcel of land previously held for future development that we plan to sell.

In addition, our cancellation rate as a percentage of gross orders rose sharply in the 2022 third quarter and increased further in the fourth quarter to 68%, compared to 13% in the year-earlier quarter.

Our return on equity (“ROE”) for 2022 improved 470 basis points to 24.6%, compared to 19.9% for 2021.

Housing revenues for 2022 rose 42% year over year from $682.7 million due to increases in both the number of homes delivered and the average selling price of those homes.

With our substantial backlog value of $3.69 billion at November 30, 2022, we believe we can achieve our projected results for 2023, subject to the factors and risks described in this report.

In addition, selling, general and administrative expenses as a percentage of housing revenues improved 50 basis points from 2021 to 8.9%, primarily due to lower internal and external commissions, and increased operating leverage as a result of higher housing revenues.

The year-over-year growth in our financial services revenues for 2022 reflected increases in both title services revenues and insurance commissions.

Excluding the inventory-related charges associated with housing operations described above, our adjusted housing gross profit margin increased 300 basis points to 24.8% in 2022 from 21.8% in 2021.

•Housing Gross Profits – In 2022, housing gross profits increased by $440.9 million, or 36%, to $1.67 billion from 2021.

Net income and diluted earnings per share increased 45% and 51%, respectively, each as compared to 2021.

Operating income increased from 2021, reflecting growth in housing gross profits, partially offset by higher selling, general and administrative expenses.

Our average community count for 2022 increased 4% from the previous year, and our ending community count increased 13%.

Operating income increased from 2021, reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses.

Our selling, general and administrative expenses as a percentage of housing revenues improved 90 basis points in 2022, largely reflecting lower external sales commissions and increased operating leverage due to our higher housing revenues as compared to the previous year, partly offset by the above-mentioned higher expenses.

Operating income increased from the previous year, mainly due to higher housing gross profits, partially offset by higher selling, general and administrative expenses and the absence of land sale profits in the current year.

Our cancellation rate as a percentage of gross orders for the 2022 fourth quarter increased to a historically high 68%, from 13% for the corresponding 2021 quarter.

At the same time, with the deceleration in housing starts compared to a year ago, we are pursuing reductions in our direct construction costs and cycle times to help offset any such pricing adjustments and other concessions we may implement.

The principal amount of loan originations increased 3% in 2022 mainly due to a 2% increase in the number of homes we delivered and an 18% increase in the average selling price of those homes, partly offset by a decrease in the percentage of homebuyers using KBHS.

The improvement in this segment’s selling, general and administrative expenses as a percentage of housing revenues was mainly due to lower external sales commissions and increased operating leverage from higher housing revenues.

In addition, general and administrative expenses in 2021 benefited from a $4.3 million Employee Retention Credit (“ERC”), which is described in Note 14 – Income Taxes in the Notes to Consolidated Financial Statements in this report.

These favorable impacts were partly offset by higher construction costs and an increase in inventory-related charges impacting the housing gross profit margin.

As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

This gain reflected a greater number of customers who elected to lock their mortgage interest rates and for relatively extended periods in 2022, aligned with their expected home delivery date, due to the sharp rise in such rates during the year.

The year-over-year improvement in this segment’s selling, general and administrative expenses as a percentage of housing revenues mainly reflected lower external sales commissions and increased operating leverage from higher housing revenues.

These favorable impacts were partly offset by increased expenses to support current operations (approximately 30 basis points); an increase in inventory-related charges (approximately 30 basis points); and other miscellaneous factors (approximately 10 basis points).

Our financial services pretax income for 2022 was essentially even with the previous year as improved results from our insurance and title services businesses were offset by a decrease in the equity in income of unconsolidated joint ventures.

KB Home is a homebuilding company based in the United States, founded in 1957 as Kaufman & Broad in Detroit, Michigan. It was the first company to be traded on the NYSE as a home builder and was a Fortune 500 company from 2000 through 2008. Its headquarters are in Los Angeles, California. The company has built 550,000 homes since its founding. It builds homes primarily for first-time home buyers.

KB Home operates as a homebuilding company in the United States. It operates through four segments: West Coast, Southwest, Central, and Southeast. The company builds and sells various homes, including attached and detached single-family residential homes, townhomes, and condominiums primarily for first-time, first move-up, second move-up, and active adult homebuyers. It also offers financial services, such as insurance products and title services. It has operations in Arizona, California, Colorado, Florida, Nevada, North Carolina, Texas, and Washington. The company was formerly known as Kaufman and Broad Home Corporation and changed its name to KB Home in January 2001. KB Home was founded in 1957 and is headquartered in Los Angeles, California.

KB Home (KBH) boosts shareholder rewards with a 25% dividend increase and a $1-billion share repurchase authorization.

KB Home (KBH) Cheers Investors With 25% Dividend Hike

KB Home (KBH) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

KB Home (KBH) Down 12% Since Last Earnings Report: Can It Rebound?

Existing home sales plunged 4.3% in March from April on the back of increasing mortgage rates.

Existing Home Sales Dwindles in March: What's Causing It?

KB Home and Lovesac have been highlighted as Zacks Bull and Bear of the Day.

KB Home and Lovesac have been highlighted as Zacks Bull and Bear of the Day

This homebuilder just raised its dividend 25%.

Bull of the Day: KB Home (KBH)

LOS ANGELES, April 18, 2024--KB Home (NYSE: KBH) today announced that its Board of Directors authorized the repurchase of up to $1.00 billion of the Company’s outstanding common stock, replacing a prior authorization, which had $113.6 million remaining. The Company intends to continue its share repurchases in 2024 in a projected range of between $200 million and $400 million for the full year, including $50 million of share repurchases completed during the Company’s 2024 first quarter.

KB Home Announces New $1 Billion Share Repurchase Authorization and Increase in Quarterly Dividend

D.R. Horton's (DHI) fiscal 2024 second-quarter performance benefits from limited affordable price points and favorable demographics. Inflation and mortgage/interest rates hurt.

D.R. Horton (DHI) Stock Up on Q2 Earnings Beat, Orders Rise

KB Home (KBH) is technically in oversold territory now, so the heavy selling pressure might have exhausted. This along with strong agreement among Wall Street analysts in raising earnings estimates could lead to a trend reversal for the stock.

KB Home (KBH) Loses -12.83% in 4 Weeks, Here's Why a Trend Reversal May be Around the Corner

NVR, KB Home, Toll Brothers, D.R. Horton and PulteGroup are included in this Analyst Blog.

The Zacks Analyst Blog Highlights NVR, KB Home, Toll Brothers, D.R. Horton and PulteGroup

Housing starts & building permits decrease in March, given higher rates, falling short of market expectations.

March Sees U.S. Housing Starts & Permits Fall Below Expectations

In terms of shipments from China, imports of solar panels stand at 75 per cent, bulk drugs ingredients 69 per cent, electronics 67 per cent and consumer durables 45 per cent being the worst hit.

Coronavirus impact: Durables, drugs, electronics to run out of steam with 70% import dependence, says Crisil

As China continues to battle the outbreak of the deadly Coronavirus, closed factories around Hubei province of China could impact the business of Indian consumer durable manufacturers that import ...

Amid Coronavirus scare, these 3 consumer durable stocks could gain as China halts production

The expert said that the economic slowdown has not affected the sector, which grew by 10 per cent in the first three quarters of 2019-20 Growth of consumer durables segment is expected to pick up ...

Consumer durables growth to pick in last quarter of FY20, says official

According to an analysis of Crisil, companies dealing with solar panels, bulk drugs, electronics, consumer durables would be worst hit. In terms of shipments from China, imports of solar panels ...

Durables, drugs, electronics to take a hit

Mahindra and Mahindra Financial Services (Mahindra Finance) has entered the consumer durables and personal loan segment for its existing customers and is hopeful that the slowdown in the auto ...

Mahindra Finance forays into consumer durables, personal loan for existing borrowers

Prices of consumer durables such as televisions sets, air conditioners, refrigerators and microwaves could rise in the next one month in India as a partial clamp down of Chinese factories amid the ...

Consumer durable prices in India expected to rise in a month, says CRISIL

Venkat Paruchuri, chief product officer at Pine Labs, noted: “Our initial focus will be on mobile, consumer durables and IT categories. We hope to extend the instant credit facility to other categories such as apparels and fashion, education, wellness and healthcare, and travel and tourism over time.” Paruchuri added: “At Pine Labs ...

Pine Labs Partners ZestMoney, a Leading Consumer Lending Fintech in India, to Offer In-Store Digital Equated Monthly Installment Options

Consumer durable makers expect to see component shortage challenges to intensify next month due to the novel coronavirus outbreak, even as some Chinese component makers have resumed production though only at suboptimal levels. The first set of shipments ...

Coronavirus impact: Consumer durable makers expect component shortage to intensify in April

Consumer goods are primarily studied across two main categories in this report, namely FMCG (fast moving consumer goods) and consumer durables. Request a sample of this premium research: https://www.bigmarketresearch.com/request-sample/3476329#utm_source=OPN&amp;utm_medium=Rajashree Armenia is a landlocked country in the South Caucasus region of ...

Armenia Consumer Goods Market to Reach $ 2,519 Million by 2026, Registering a CAGR of 4.7%

Consumer durable company Crompton Greaves Consumer Electricals (CGCE) (CMP: Rs 283, Market cap: Rs 17,785 crore) delivered a show full of sparks for the December quarter of 2019-20. Electrical ...