KB Homes Is It Better?

KB Homes (KBH) released Q2 results and announced that, while the housing market is still bad, they have generated cash. Cash is king especially when you are levered as a home builder. They have also taken the opportunity to redeem an expensive debt issue which will improve the balance sheet and reduce interest costs.

Managements comments are all based on rear view mirror considerations. Yes cash is up. Given that the markets stink so badly you need to get a handle on the burn rate for cash. How much longer can the company go before it hits the wall? There is a scenario that can make any company blow up and go under. Management needs to show that it knows where the precipice is, before it goes over it.