L.A.-Based KB Home Sees Profit Increase 25% as Demand Builds

KB Home said Wednesday that its second-quarter earnings jumped almost 25%, a sign that the nation’s residential real estate market continued to sizzle even as interest and mortgage rates nudged upward.

The Los Angeles-based home builder reported net income of $102.1 million, or $2.40 a share, for the three months ended May 31, compared with net income of $81.4 million for the same period last year.

Revenue rose to $1.57 billion from $1.44 billion a year earlier.

The results beat Wall Street’s forecast of $2.10 a share, according to Thomson First Call. And there were indications the good news might continue.

“The company had a very strong second quarter as regards to new orders,” said Craig Kucera, a senior analyst with Friedman, Billings, Ramsey Group Inc. “Those are homes that are going to be converted to revenue and cash flow” during the rest of the year.

The Commerce Department said Wednesday that residential building permits nationwide rose 3.5% in May -- the biggest monthly gain since October.

“That’s actually indicative of a pretty strong demand continuing,” Kucera said.

Kelly Masuda, KB Home’s vice president, capital markets, and treasurer, attributed the strong housing demand to a strengthening economy, as well as mortgage rates that, although rising, remain low by historical standards.

“We haven’t seen demand slow down at all,” he said. “Business has been absolutely terrific for us.”

KB Home, one of the biggest home builders in the nation, recently unveiled two plans to help it keep growing even in the face of rising mortgage rates. It previously announced acquiring about 940 acres in the booming Las Vegas area. KB Home also this month purchased Indianapolis-based Dura Builders Inc., a move designed to accelerate its Midwest expansion.

The company released its earnings after the markets closed. Its shares rose as high as $64.52 in after-hours trading after closing at $63.71, up 32 cents, on the New York Stock Exchange.