Hovnanian Q1 Loss Widens, Results Miss View

(RTTNews) - Home builder Hovnanian Enterprises, Inc. (HOV) on Wednesday reported a loss for the first quarter that widened from last year, when results were boosted by a tax benefit.

In addition, home deliveries in the latest quarter declined 4 percent from last year and the company noted that a "strong recovery trajectory has softened." Loss per share was wider than analysts' expectations and revenues missed their estimates.

Ara Hovnanian, chief executive officer of Hovnanian Enterprises said, "While our first quarter is always the slowest seasonal period for net contracts, the strong recovery trajectory from the spring selling season of 2013 has softened on a year-over-year basis. Net contracts in the months of December, January and February have not met our expectations."

Hovnanian added that in addition to the lull in sales momentum, both sales and deliveries were impacted by poor weather conditions. Deliveries were further impacted by shortages in labor and certain materials in some markets that have extended cycle times, he noted.

The Red Bank, New Jersey-based company reported net loss for the first quarter that widened to $24.52 million or $0.17 per share from $11.31 million or $0.08 per share in the prior-year quarter. The prior-year quarter's results included a federal tax benefit of $9.7 million.

On average, 12 analysts polled by Thomson Reuters expected the company to report loss of $0.05 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 2 percent to $364.05 million from $358.21 million in the same quarter last year, but missed analysts' consensus estimate of $401.52 million.

Total homebuilding revenues for the quarter increased 3 percent from the year-ago period to $355.95 million, while financial services revenues declined 31 percent to $8.09 million.

Hovnanian's net contracts for the quarter, including unconsolidated joint ventures, declined 10.6 percent from last year to 1,202 homes. The dollar value of net contracts declined 1.6 percent to $455.8 million.

Home deliveries, including unconsolidated joint ventures, decreased 4.2 percent from the year-ago quarter to 1,138 homes.

Contract backlog at the end of the first quarter, including unconsolidated joint ventures, stood at $904.4 million for 2,456 homes, representing year-over-year increase of 11.4 percent and 6.7 percent, respectively.

The contract cancellation rate, including unconsolidated joint ventures, for the quarter was 18 percent, up from 17 percent in the same period last year.

The company recorded a 180 basis points year-over-year improvement in home-building gross margin, before interest expense and land charges included in cost of sales, to 18.8 percent.

Looking ahead, Hovnanian said, "Our first quarter has always been the slowest seasonal period and we expect to report stronger results as the year progresses. We believe this is a temporary pause in the industry's recovery, and based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery."

In Wednesday's regular session, HOV is trading at $5.71, down $0.36 or 5.93 percent on a volume of 529,303 shares.