Hovnanian Q3 Results Miss Estimates

(RTTNews) - Home builder Hovnanian Enterprises, Inc. (HOV) reported Wednesday a net loss for the third quarter compared to a profit last year, reflecting a revenue drop, lower home building gross margins and higher expenses.

Loss per share also came in wider than analysts' expectations, and quarterly revenues missed their estimates. Looking ahead, the company also provided revenue guidance for the fourth quarter of fiscal 2015 and for the full-year 2016.

"While we are disappointed with the loss for the third quarter, it was within the guidance we gave on our second quarter conference call," Chairman, President and CEO Ara Hovnanian said.

The Red Bank, New Jersey-based company reported a net loss of $7.68 million or $0.05 per share for the third quarter, compared to net income of $17.11 million or $0.11 per share in the prior-year quarter.

On average, five analysts polled by Thomson Reuters expected the company to report a loss of $0.01 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter declined 1.9 percent to $540.61 million from $551.01 million in the same quarter last year, and missed five Wall Street analysts' consensus estimate of $611.95 million.

Total home building revenues decreased to $526.25 million from $539.90 million, while financial services revenues grew to $14.36 million from $11.11 million in the year-ago quarter.

Home deliveries, including unconsolidated joint ventures, decreased 4.8 percent from the year-ago quarter to 1,475 homes.

Hovnanian's consolidated net contracts edged grew 13 percent from last year to 1,533 homes, and consolidated dollar value of net contracts improved 19.7 percent to $619.41 million from a year ago.

Meanwhile, net contracts for the quarter, including unconsolidated joint ventures, also increased 16.4 percent from last year to 1,658 homes, and dollar value of net contracts grew 27.9 percent to $694.63 million.

Contract backlog at the end of the third quarter, including unconsolidated joint ventures, stood at $1.37 billion for 3,275 homes, a year-over-year increase of 23.5 percent and 12.7 percent, respectively.

The contract cancellation rate, including unconsolidated joint ventures, for the third quarter was 20 percent, compared to 22 percent in last year's third quarter.

The company recorded a 350 basis points year-over-year contraction in home building gross margin, before interest expense and land charges included in cost of sales, to 17.8 percent from last year. Total interest expense as a percentage of total revenues was up 70 basis points to 7.2 percent from last year.

Total costs and expenses for the quarter increased to $550.17 million from $535.85 million in the year-ago quarter.

Looking ahead, the company expects total revenues for the fourth quarter to be about $745 million, and total revenues for all of fiscal 2016 in a range of $2.7 billion to $3.1 billion, both assuming no changes in current market conditions.

Analysts are currently looking for revenues of $724.70 million for the fourth quarter and $2.64 billion for the full-year 2016.

"Furthermore, assuming no changes in market conditions, we are on track for solid profitability during the fourth quarter of fiscal 2015 and are well positioned for a breakout year from the perspective of deliveries and revenues which should lead to profitability in fiscal 2016," Hovnanian added.

In Wednesday's regular trading session, HOV is currently trading at $1.86, down $0.10 or 4.85% on a volume of 1.47 million shares. In the past 52-week period, the stock has been trading in a broad range of $1.37 to $4.42.