Hovnanian Q3 Earnings Top View, But Revenues Miss

(RTTNews) - Home builder Hovnanian Enterprises, Inc. (HOV) reported Thursday a profit for the third quarter that grew from last year, reflecting an income tax benefit, improved home building gross margin and revenue growth. Earnings per share topped analysts' expectations, while quarterly revenues missed their estimates. Looking ahead, the company continues to project profitability for fiscal 2014.

"We were pleased with the strength of our gross margins and our revenue growth during the third quarter of fiscal 2014," Chairman, President and CEO Ara Hovnanian said.

The Red Bank, New Jersey-based company reported net income of $17.11 million or $0.11 per share for the third quarter, higher than $8.47 million or $0.06 per share in the prior-year quarter.

On average, eleven analysts polled by Thomson Reuters expected the company to report earnings of $0.09 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 15.2 percent to $551.01 million from $478.36 million in the same quarter last year, but missed ten Wall Street analysts' consensus estimate of $559.47 million.

Total homebuilding revenues increased to $539.90 million from $465.48 million, and financial services revenues grew to $11.11 million from $12.88 million in the year-ago quarter.

Home deliveries, including unconsolidated joint ventures, increased 3.1 percent from the year-ago quarter to 1,549 homes.

Hovnanian's consolidated net contracts increased 6.3 percent from last year to 1,448 homes, and consolidated dollar value of net contracts grew 4.6 percent to $517.3 million.

Meanwhile, net contracts for the quarter, including unconsolidated joint ventures, declined 9.2 percent from last year to 1,424 homes, and dollar value of net contracts edged down 0.7 percent to $542.9 million.

Contract backlog at the end of the third quarter, including unconsolidated joint ventures, stood at $1.11 billion for 2,907 homes, a year-over-year increase of 7.8 percent and 0.5 percent, respectively.

The contract cancellation rate, including unconsolidated joint ventures, for the third quarter was 22 percent, compared with 18 percent in last year's third quarter.

The company recorded a 100 basis points year-over-year improvement in home building gross margin, before interest expense and land charges included in cost of sales, to 21.3 percent.

The results for the latest quarter include a $1.98 million income tax benefit, compared to a income tax expense of $1.92 million last year.

Looking ahead to fiscal 2014, the company said it continues to project profitability for the full year.

"Assuming no change in current market conditions, we expect to be profitable for the full fiscal 2014 year. We believe the housing industry remains in the early stages of a recovery. We anticipate generating revenue growth from continued investments in new communities. This will allow us to leverage our SG&A and interest costs, which we expect will result in higher levels of profitability in future years," Hovnanian added.

In Thursday's regular trading session, HOV is currently trading at $4.31, up $0.11 or 2.55% on a volume of 2.06 million shares. In the past 52-week period, the stock has been trading in a range of $3.75 to $6.80.