Homebuilder KB Home (NYSE: KBH) posted a surprise EPS gain of $0.23 for its fourth quarter of 2010 ended in November. Analysts had expected an EPS loss of -$0.17. The company’s revenue fell by -33% year-over-year to $451 million, but that still beat estimates of $446.4 million.

Other builders will be reporting results in the next few weeks. Next up is Lennar Corp. (NYSE: LEN), which reports earnings next Monday. Analysts are expecting EPS of $0.02 and revenue of $753.8 million. Ryland Group Inc. (NYSE: RYL) reports earnings on January 26th and is expected to post an EPS loss of -$0.35 on revenue of $232.3 million. DH Horton Inc. (NYSE: DHI) reports earnings on January 31st and analysts are estimating an EPS loss of -$0.03 on revenue of $796.1 million. PulteGroup Inc. (NYSE: PHM) reports earnings on February 1st, and is expected to post an EPS loss of -$0.09 on revenue of $1.12 billion. Toll Brothers Inc. (NYSE: TOL) reports its 2011 second fiscal quarter earnings on February 21st, and is expected to post an EPS loss of -$0.07 on revenue of $319 million.

None of this is very pretty, but the bar has been set so low for the homebuilders that it might be nearly impossible for them to fail to clear it. After all, KB Home did it.

How the company did it is instructive. KB Home’s SG&A expenses for the previous quarter were $78.6 million, compared with just $55.7 million in the fourth quarter. That’s a difference of $22.9 million. The company’s total net income for the quarter $17.4 million. Without the cost cutting, the company would have lost more than $5 million.

As for its actual products, KB Home had a tough quarter. The one bright spot was the company’s average selling price, which rose from $203,400 in the same period a year ago to $232,500. But the company delivered more than 1,100 fewer homes in the quarter than in the same period a year ago. That drop is almost identical with the total drop for the full year, indicating that sales are might be getting worse, not better.

Optimism about for homebuilders’ shares comes from their ability to manage their expenses and make land deals, not from building and selling homes. Analysts don’t expect much from these companies, and any positive movement is hailed as the start of a housing recovery. That may be true next year, but it won’t happen in 2011.

Although mortgage interest rates are still below 5%, few buyers are interested. People are more worried about their jobs and their wages than they are buoyant about mortgage rates. The 2% cut to social security taxes also won’t make any difference in the housing market. For the homebuilders to prosper, US economic growth needs to reach 4%, which would cut the unemployment rate by at least 2%. Even the most optimistic outlook for 2011 doesn’t forecast that kind of growth.

KB Home’s shares are trading up nearly 8%, to $15.42, at market open this morning. The company’s 52-week range is $9.43-$20.13. The other homebuilders are seeing their shares rise too, between 1.5% and 2.5%. The SPDR Homebuilders ETF (NYSE: XHB) is also up about 1.5% this morning, to $17.93, well within its 52-week range of $13.59-$20.00.

Paul Ausick

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