Latest news with #JeffreyMezger
Los Angeles Times
18-05-2025
- Business
- Los Angeles Times
Fireproofing for the Future: New Wildfire-Resilient Neighborhood May be the New Paradigm
Los Angeles company's Southern California new-home community is built with IBHS's research-backed mitigation strategies to reduce the risk from wildfires L.A.-based KB Home, one of the largest homebuilders in the U.S., has unveiled the nation's first new-home community that meets the home- and neighborhood-level wildfire resilience standards developed by the Insurance Institute for Business & Home Safety (IBHS), an independent nonprofit research organization dedicated to protecting homes and communities against natural disasters. Utilizing fire-resistant building materials, methods and features based on over a decade of IBHS wildfire research, KB Home's Dixon Trail community in Escondido is designed to IBHS's highest level of protection against direct flame contact, radiant heat and embers, which helps to meaningfully reduce the likelihood of wildfire spread. The Dixon Trail community will have 64 homes upon completion. Each home will be built to the 'Wildfire Prepared Home' plus standard and receive a designation certifying that it has met IBHS's most stringent requirements for homesitelevel fire mitigation. Dixon Trail will receive a provisional neighborhood-level designation based on its design, confirming that the community has implemented preventative measures to reduce the likelihood of initial ignitions from an approaching wildfire, protect against embers that could spark spot fires and slow fire spread if ignitions occur. Dixon Trail is the first applied use of the researched-based, community-level mitigation strategies of structure separation, fire pathway reduction and wildfire-resilient building materials under IBHS's new Wildfire Prepared Neighborhood standard. Once the neighborhood is completed and has passed an IBHS evaluation, a final Wildfire Prepared Neighborhood designation will be issued. 'In keeping with our tradition of innovation, we are pleased to offer today's buyers the ability to choose a wildfire-resilient home and community,' said Jeffrey Mezger, chairman and chief executive officer of KB Home. 'We are proud that our new Dixon Trail community, with its system of mitigation features, is the first in the nation to meet IBHS's wildfire resilience standards at the homesite level and at the neighborhood level.' Research shows that both homesite- and neighborhood- level strategies are key in preventing wildfires from becoming catastrophic. As a model of wildfire resiliency, Dixon Trail has incorporated research-backed mitigation actions into the design of its homesites, including the installation of Class A fire-rated roofs, noncombustible gutters, upgraded windows and doors, and ember- and flame-resistant vents as well as the creation of a five-foot noncombustible buffer around structures. At the neighborhood level, wildfire risk is reduced by separating almost all structures by more than 10 feet and decreasing potential fuels through the use of fire-resistant materials, like all-metal fence systems. 'With fire becoming an increasingly common threat in the West, it's crucial to reconsider how we construct communities in fire-prone regions,' said IBHS CEO Roy Wright. 'KB Home is at the forefront, implementing our research-driven wildfire mitigation strategies for both the parcel and neighborhood levels at Dixon Trail.' KB Home has a long-standing history of bringing innovation to homebuilding and achieving industry firsts. The company was founded in 1957 with the forward-thinking idea of building slab homes to make homeownership more affordable for first-time buyers. In 1976, KB Home introduced its first energy-efficient homes, setting the stage for future sustainability initiatives. Its first ENERGY STAR certified home was built in 2000, and in 2008, KB Home made a broad commitment to design all homes to be ENERGY STAR-certified. The company has continued to push boundaries, becoming the first national homebuilder to offer WaterSense labeled homes in 2010 and unveiling all-solar communities in 2011. More recently, in 2022, KB Home became the first national builder to adopt the U.S. Environmental Protection Agency's (EPA) highest water-efficiency standards in drought-prone regions and pioneered two all-electric, solar- and battery-powered microgrid communities. In 2024, the company accomplished a major milestone by building its 200,000th ENERGY STAR-certified home - more than any other builder in the country. KB Home's Dixon Trail community represents yet another milestone: the first IBHS-designated, wildfire-resilient neighborhood in the nation.
Yahoo
29-03-2025
- Business
- Yahoo
Homebuilders face 'muted' spring selling season amid high mortgage rates, tariff uncertainty
Homebuilders are having a rough start to the spring selling season amid high mortgage rates and tariff uncertainty. On Monday, KB Home (KBH) reported a 17% drop in net orders from the year-earlier period for its fiscal first quarter ending Feb. 28. The company also dialed down its average selling price range for 2025 to $480,000 to $495,000. In January, it expected a range of $488,000 to $498,000. Shares of KBH fell 4% in after-hours trading following the earnings report. "While longer-term housing market conditions remain favorable, driven by demographics and an undersupply of homes, demand at the start of the spring selling season has been more muted than we have seen over the past few years," KB Home CEO Jeffrey Mezger told analysts and investors on the earnings call. Many real estate agents and builders consider Super Bowl weekend, which landed on Feb. 8-9 of this year, to be the unofficial kickoff for the peak homebuying and selling season, which lasts through early June. Read more: 2025 housing market — is this a good time to buy a house? Mezger noted that the company typically sees a pickup in net orders in late January and early February. This season, that did not materialize, reflecting the hesitancy among buyers to purchase a home. As a result, KBH lowered its guidance for 2025 housing sales to $6.60 billion to $7 billion from its previous forecast of $7 billion to $7.5 billion. Overall, sales of new single-family homes rebounded slightly in February amid warmer weather and falling mortgage rates. But it's unclear if the momentum will last. "If the builders can figure out what leverage to pull from an affordability standpoint, the buyers and the demand are out there, but it's not going to be as easy as it was," Wedbush Securities senior vice president of equity research Jay McCanless told Yahoo Finance in an interview. This challenge is not unique to KB Home. The second-largest homebuilder, Lennar, reported a slight 1% increase in net new orders from the year-earlier period, totaling 18,355. However, the company projected lower-than-expected quarterly orders due to the tough housing market. When it reported Q1 results last week, Lennar (LEN) forecast new orders between 22,500 and 23,500 for its second fiscal quarter, lower than analysts' estimate of 23,800 homes. While mortgage rates have decreased slightly, they are still hovering around 6.7%, prompting the builder to reduce its average sales price, after incentives, to $408,000 in the quarter, marking a 1% decline from last year. "During the quarter, as we move past the beginning of February, we do not see the seasonal pickup typically associated with the beginning of the spring selling season," Lennar CEO Jonathan Jaffe told analysts and investors on the earnings call. Consequently, Evercore ISI analyst Stephen Kim downgraded Lennar to In Line from Outperform, with a price target of $131, down from $159, following the fiscal first quarter report. The downgrade was driven by the second quarter gross margin guidance of 18%, which fell below expectations, with management attributing the decline to increased incentives compared to the first quarter. Evercore ISI argues that Lennar's strategy to sustain incentive volume will result in its profitability "at dramatically depressed levels," Kim wrote. To address affordability, builders may need to adjust home sizes, limit options, or "find other ways to skinny the price," McCanless said. For example, they might replace more extensive home plans with smaller ones, such as swapping 2,500-2,600-square-foot plans for 1,700-1,800-square-foot alternatives. Another concern for builders is President Trump's executive order, effective in April, imposing tariffs on construction materials from Canada and Mexico. The National Association of Home Builders (NAHB) warns that this could raise the cost of imported materials by over $3 billion, with builders estimating an average rise of $9,200 per home. This growing pressure is contributing to increased uncertainty among smaller builders, who are becoming concerned about the housing market's outlook. Read more: The latest news and updates on Trump's tariffs Wolfe Research highlighted this concern in its recent survey of private builders, noting that while orders increased by about 22% month over month in January, this growth was well below the typical 39% average seen in recent years. Smaller builders' confidence also took a hit in February, reflecting a three-point drop from January to its lowest level in seven months. "At this point, for them to be able to drive much better demand without sacrificing margin, it's going to likely have to come in the form of lower mortgage rates or people regaining their confidence in the macroenvironment and in their employment situation, which both those parts are really out of builder's hands," Trevor Allinson, director and senior research analyst at Wolfe Research, told Yahoo Finance. D.R. Horton (DHI), the nation's biggest homebuilder, is slated to report its fiscal second quarter earnings on April 17. Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv. Sign in to access your portfolio
Yahoo
25-03-2025
- Business
- Yahoo
KB Home (KBH) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic Adjustments
Total Revenues: $1.4 billion for the first quarter of fiscal 2025. Diluted Earnings Per Share: $1.49 in the first quarter. Gross Margin: 20.3%, excluding inventory-related charges. Operating Income Margin: 9.3% for the first quarter. Book Value Per Share: Over $57, a 12% year-over-year increase. Net Orders: 2,772 net orders in the first quarter. Average Community Count: 257, up 7% year-over-year. Backlog: Over 4,400 homes valued at $2.2 billion. Homes Delivered: 2,770 homes, a 9% decrease year-over-year. Average Selling Price: $500,700 for the first quarter. Housing Gross Profit Margin: 20.2% for the first quarter. SG&A Expense Ratio: 11% for the first quarter. Net Income: $109.6 million for the first quarter. Land Investment: $920 million in land acquisition and development. Share Repurchases: $50 million in share repurchases during the quarter. Total Liquidity: $1.25 billion, including $268 million of cash. Debt-to-Capital Ratio: 30.5% at the end of the quarter. Warning! GuruFocus has detected 5 Warning Signs with XTER:HPHA. Release Date: March 24, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. KB Home (NYSE:KBH) reported a gross margin of 20.3%, which was above the midpoint of their guided range, despite lower deliveries. The company increased its book value per share to over $57, marking a 12% year-over-year increase. Net orders showed improvement in the last five weeks of the quarter, with a weekly average of about 300, equating to an absorption pace of 5.1 net orders per month per community. Build times improved to 147 days, the best level in the last four years, with some divisions already achieving the target of 120 days. KB Home (NYSE:KBH) maintained a healthy balance sheet with a debt-to-capital ratio of 30.5% and significant financial flexibility, including $1.25 billion in total liquidity. The company lowered its revenue guidance for fiscal 2025 due to softer demand at the start of the spring selling season. Deliveries fell short of expectations by approximately 225 homes, impacting both revenues and net income. The average absorption pace per community decreased to 3.6 homes compared to 4.6 in the previous year's first quarter. Housing gross profit margin decreased to 20.2% from 21.5% in the prior year, mainly due to higher land costs and increased homebuyer concessions. The company experienced delays in Southern California deliveries due to utility service issues related to wildfires, affecting about 75 homes. Q: What level of price adjustments was necessary to stimulate consumer demand, and how did these adjustments compare to typical seasonal trends? A: Jeffrey Mezger, CEO, explained that the company decided to eliminate hidden incentives and adjust base prices to reflect the true cost on their website. This move was necessary to align with market conditions and stimulate demand. Robert McGibney, COO, added that about half of their communities saw price reductions ranging from $5,000 to $30,000, averaging around $15,000 to $16,000. These adjustments led to a 75 basis point reduction in margins, but the consumer response was positive, leading to improved sales performance. Q: How does KB Home plan to improve operating margins in the second half of the year despite the challenges faced in the first quarter? A: Jeffrey Mezger, CEO, stated that the improvement in operating margins is expected to come from better leverage, particularly in SG&A, as they deliver more houses. The margin per house is expected to remain stable, and the company has already factored in the necessary adjustments in their guidance. Q: Are there any regional differences in terms of sales performance and pricing adjustments? A: Robert McGibney, COO, noted that Florida was the softest state in terms of sales demand, requiring more significant pricing adjustments. In contrast, the West and Southwest regions performed better, with fewer pricing changes needed. Texas showed mixed results, with Houston and Austin performing well, while San Antonio required broader adjustments. Q: How is KB Home managing its backlog and potential price adjustments for homes already in the pipeline? A: Robert McGibney, COO, mentioned that they are handling backlog adjustments on a case-by-case basis. Most deals in the backlog were individually negotiated, and there is minimal exposure to price adjustments. The company has made some adjustments where necessary, but overall, the impact is expected to be small. Q: What is the current status of KB Home's spec production, and how does it compare to previous years? A: Robert McGibney, COO, stated that the current mix is about 60% built-to-order (BTO) and 40% spec homes, similar to previous years. Historically, the company aimed for an 80% BTO and 20% spec mix. The goal is to increase BTO sales, which typically yield higher margins, and gradually return to the historical mix. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
