KB Home Hammered by Charges

Updated from 9:28 a.m. EST

KB Home(KBH Quote) swung to a fourth-quarter loss, as results were hurt by large land impairment charges and increased cancellations of home contracts.

The homebuilder reported a loss of $49.6 million, or 64 cents a share, for the quarter, reversing a year-earlier profit of $304.4 million, or $3.44 a share.

The results were hampered by $343.3 million of writedowns and write-offs associated with high-priced land purchased in recent years that is no longer profitable amid the housing downturn.

Analysts expected a loss of $1.14 a share, according to Thomson Financial.

Revenue rose 13% to $3.55 billion. The company's gross margin on homes sold slid to 11.7% from 27.1% a year earlier.

New orders fell 38%, primarily due to a rising cancellation rate. KB Home said its cancellation rate of new home contracts jumped to 48% from 31% in the year-earlier period.

The order decline was slightly better than the decline seen last quarter, according to a research note from Bank of America analyst Daniel Oppenheim.

He noted that cancellations represented 23% of starting backlog, an improvement over 25% in the third quarter.

"We believe the sequential improvement is largely due to higher incentives as we have yet to see prices stabilize," Oppenheim wrote.

The company's backlog of homes sold but not yet booked as revenue fell 32% year over year.

Oppenheim notes that "this will likely lead to sharply lower revenues in '07."

The report apparently wasn't as bad as investors were expecting. Shares of KB Home recently were up 3.4% to $53.68.