Kaufman & Broad stock falls despite revenue growth

Investing.com -- Shares of Kaufman & Broad SA (EPA:KOF) fell 2.5% despite the company reporting a 15.5% increase in fourth-quarter revenue to €376 million, including a 5% rise in Housing revenues.

The decline in stock price might be attributed to the softer gross margin, which dipped to 16.5% compared to 20% in the previous quarter and below analyst estimates of 21%.

The French real estate developer experienced a mixed financial quarter with commercial revenues exceeding expectations, particularly due to progress on the Austerlitz project. The underlying EBIT for the fourth quarter was 6% higher than forecasts at €27 million, translating to a 7.3% operating margin. This margin resilience was largely due to effective operational expenditure control, which stood at 9% of revenues.

Despite these positive aspects, investors may have reacted to the softened gross margin, which could signal concerns about profitability moving forward. The net cash position, however, showed a strong increase, reaching €386 million, compared to €177 million at the end of the previous fiscal year.

This improvement in liquidity was significant and reflected the company’s negative working capital requirement, which included approximately €200 million for the Austerlitz project and a robust pace of sales.

Housing sales continued to show an upward trend in the fourth quarter, with pre-sales growing both in volume (1%) and value (7%). The housing backlog as of November 30, 2024, stood at €1,988 million, representing over two years’ worth of revenues.

Bernstein analysts commented on Kaufman & Broad’s performance, stating, "Kaufman & Broad reported 2024 results on 30 January, which were overall in line with estimates and its 2024 guidance. The highlight was the year-end net cash position, which totaled €386m (including the value of puts on acquisitions). 2025 guidance calls for 5% sales growth and an increase in operating margin."

The proposed dividend of €2.2 per share for the May 6 shareholders’ meeting, which represents a 6.6% yield, may offer some solace to investors amidst the current stock decline.

Looking ahead, the company’s guidance for 2025 suggests a positive outlook with expectations of sales growth and an improved operating margin.

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