KBH KB Home

KB Home easily topped expectations in its second quarter as first-time buyers emerged with force, pushing new orders and deliveries higher and signaling a strong start to the crucial spring selling season.

The Los Angeles-based home builder's results came amid a string of housing market data showing a solid, though not spectacular, spring season. In its most recent report, the Commerce Department said housing starts slipped 0.3% in May from April, a decline owned in part to what many builders say is a shortage of skilled labor, though starts were still 9.5% higher than a year earlier.

For KB Home, backlogs—a gauge of the company's own housing starts—rose 10% during the quarter from a year earlier. At the same time, deliveries climbed 30%, about twice the rate analysts anticipated, while new orders rose 8%.

Higher deliveries and orders pulled revenue 30% higher, to $808.5 million, and drove profit up to $15.6 million from $9.6 million. On a per-share basis, earnings rose to 17 cents from 10 cents a year earlier. The results from the latest quarter included a $6.8 million hit stemming from the company's recent decision to exit the Washington, D.C., market.

Analysts expected 14 cents a share on $747.1 million in revenue, according to Thomson Reuters.

"It was a few things that all came together," Chief Executive Jeff Mezger said of the better-than-expected results. One key development: Mr. Mezger highlighted a "quickening emergence" of first-time buyers. "Millennials are finally getting a job, moving out from their parents' houses and creating demand," he said.

Strength in KB Home's West Coast market underpinned that point. Mr. Mezger said the best areas during the quarter were in Central California—areas such as Sacramento that he said aren't normally hotbeds for housing. The shift in demand inland from the coast suggests demand for more affordable housing is re-emerging, he said.

Relief from recent labor shortages also helped. The "shortage became pretty intense" during the second half of last year and delayed construction, Mr. Mezger said, but in the latest period KB Home managed to lower build times by 10 days in part because of efforts to secure labor in advance with trade partners.

The solid results bode well for the spring selling season and follow a similarly strong report from rival Lennar Corp. earlier Tuesday. Builders like KB Home and Lennar do a big chunk of their business during the spring months, when weather improves and families seek to settle into school districts before fall. They have benefited from low mortgage rates and a long streak of job growth, factors that have pushed more Americans toward buying a home and that have made the housing market one of the economy's brighter spots of late.

Mr. Mezger sees momentum continuing this year. "You do have economic growth going on," he said. "It's not roaring, but it's been stable."

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

June 21, 2016 16:45 ET (20:45 GMT)

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